Market movers today
The main event today is the US jobs report for April. We estimate nonfarm payrolls rose 170,000 in April, a bit below consensus of 190,000 but in line with the employment growth in the ADP jobs report for April. We estimate the unemployment rate ticked up to 4.6% after the big fall to 4.5% in March. While we expect wage growth to fall to 2.6% y/y, consensus calls for an unchanged print at 2.7% y/y.
After the quite dull FOMC meet ing on Wednesday, it will be interesting to listen to the different views on the stance of monetary policy, as some Fed speeches are scheduled today.
Sunday sees the final round of the French presidential election. As opinion polls accurately predicted the first round result and have pointed consistently to an Emmanuel Macron win, markets have largely priced out any French election risk premium over recent weeks. As with the first round, the main TV and radio channels will release exit polls once voting stations close at 20:00 CEST on Sunday and will be watched closely by markets.
Selected market news
In the US, in a major win for President Donald Trump and the Republican leaders, the Republicans’ healthcare bill passed the House of Represent at ives with a very slim majority. That said, it is more difficult for the bill to pass the Senate despit e T rump’s confidence, as the Republican majority is slimmer (52 versus 48) and many Republican Senators have expressed reservat ions against the bill. Majority Leader of the Senate, Mitch McConnell , has said the Senate will wait for a deeper economic analysis of the bill from the Congressional Budget Office (CBO) before vot ing on it . Although Trump at the following press conference said that the process has ‘really brought the Republican P art y t ogether’, we are in more doubt and st ill expect it to be difficult for Trump to deliver on his promises on taxes and infrast ructure. We still believe Trumponomics will come later and be smaller than previously pledged.
As widely expected, Norges Bank left rates unchanged at yesterday’s monetary policy meeting. the statement was balanced relat ive to March’s slightly dovish stance and concluded: ‘the outlook and the balance of risks for the Norwegian economy do not appear to have changed substant ially since the March Report. The key policy rate has therefore been kept unchanged at this meeting’.
In China, financial stress is increasing again, as bond yields are moving higher again, which feeds into the housing market with a lag. We have also seen a decline in stock prices and a sharp fall in iron prices. Also, the oil price has slipped from above USD50/bl yesterday morning to USD47/bl now.
In the UK, local elect ions took place yesterday and, while votes are st illing being counted, Labour seems to have suffered a heavy loss, with the Conservatives picking up support. The result is likely to be the bestresult for the Conservatives for at least 10 years. If anything, this supports our basecase scenario that PM Theresa May will lifther majority in the House of Commons significantly.
