Global shares ease after US jobs data cools some economic optimism; oil retreats from 2-year highs

A now hiring sign seen outside of the Vintage Knolls retirement and assisted living community.
A now hiring sign seen outside of the Vintage Knolls retirement and assisted living community.

  • US stock futures dipped as investors weighed up last week’s employment report ahead of inflation data this week.
  • Oil pulled back from two-year highs, under pressure from concern about an influx of Iranian supply
  • Natural resources stocks were among the biggest losers in Europe, despite strong Chinese commodity imports.
  • See more stories on Insider’s business page.

Global shares eased on Monday, as investors digested a slightly disappointing read of the US labor market and prepared for key inflation data later this week, while oil pulled back from two-year highs.

Friday’s employment report showed the US economy created 559,000 jobs in May, below the 650,000 economists had expected, while April’s number was revised up marginally to 278,000.

The report didn’t offer traders the confirmation they had hoped for of a robust recovery in hiring. At the same time, it dampened the prospect that the Federal Reserve might have to quickly rein in some of its support for the economy, which allowed stocks to end last week on a positive note.

Futures on the S&P 500, Nasdaq 100 and Dow Jones fell between 0.1 and 0.3%, indicating a slightly softer start to trade later on.

“What the May jobs report does tell us is that despite the high levels of vacancies being reported, there is a reluctance on the part of US workers to return to work,” CMC Markets chief strategist Michael Hewson said.

“This flies in the face of optimism that the economic reopening would prompt a rehiring blitz, making it much less likely that the Fed will look at an early tapering of asset purchases,” he said.

Treasury Secretary Janet Yellen told Bloomberg in an interview on Sunday that if the US economy ended up with slightly higher rates and inflation, this would be “a plus”.

“We’ve been fighting inflation that’s too low and interest rates that are too low now for a decade,” she told Bloomberg.

The next major data point will be US consumer inflation on Thursday, which is expected to show prices accelerated by 4.7% in May, following April’s 4.2% increase.

The Fed has repeatedly said it is willing to tolerate a sharper rise in consumer prices, which it believes will be short-lived. But investors are highly sensitive to any hint from economic data that might suggest an abrupt change in course by the central bank.

The dollar index was up 0.2% on the day, buoyed largely by gains versus sterling and the euro, which were both down by around 0.1% against the greenback. Yields on the 10-year Treasury note, which can act as a gauge of investor confidence, rose 2 basis points to 1.577%, indicating a degree of caution.

Overnight in Asia, Chinese trade data showed the country’s imports rose at their fastest rate in a decade. The world’s biggest commodity consumer overlooked higher raw material prices, although its crude intake slowed and exports undershot expectations. This had little impact on the major indices. The Shanghai Composite ended up 0.2%, while Tokyo’s Nikkei rose 0.3% and Seoul’s KOSPI closed 0.2% higher.

“What is clear is that the value of both imports and exports is a major contributor due to sky-rocketing raw materials prices, and that in volume terms, the evidence for a commodity supercycle emerging is thus far wholly unconvincing,” Marc Ostwald, chief global economist for ADM Investor Services, said.

Oil prices pulled back from last week’s two-year highs after the Chinese trade data, as traders weighed up the market’s ability to absorb a potential supply increase from Iran, which is in talks with global powers over its nuclear activity. Overall, demand is expected to accelerate over the course of the year, although outbreaks of COVID-19 in the likes of India have tempered some of the optimism.

Brent crude futures were last down 0.8% at $71.34 a barrel, having touched a high of $72.17 last week, while WTI futures were down 0.7% at $69.12 a barrel.

Turning to Europe, gains in the benchmark indices were restricted by declines in the mining and resources sector. Shares in Anglo American fell nearly 3%, while copper producer Fresnillo dropped 1.9%, and commodity trader Glencore lost 1.6%. French oil major Total shed 1.3%, making it one of the biggest losers on the STOXX 50 index, which slipped 0.1%. London’s FTSE 100 edged up 0.1%. Meanwhile, the mid-cap FTSE 250 rose 0.2%, shrugging off a 15% loss in the shares of office-space provider IWG, which dropped 15% after the company issued a profit warning for 2021.

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US futures and the dollar rise ahead of what traders expect to be a bumper employment report

Stock market
  • US stock futures and the dollar edged up ahead of key March payrolls report.
  • Trading was thinned out due to public holidays in most major markets.
  • Economists expect non-farm payrolls to have risen by the most in six months in March.
  • See more stories on Insider’s business page.

US stock futures and the dollar rose on Friday, ahead of a key report on unemployment that will shed further light on the resilience of the economic recovery, although trading volumes were light on account of the swathe of public holidays around the world.

Futures on the S&P 500, the Dow Jones and the Nasdaq 100 rose between 0.1 and 0.4%, suggesting the benchmark indices could see more record highs when they reopen on Monday.

On Thursday, the S&P 500 scorched past 4,000 points for the first time after data showed a sharp rebound in manufacturing activity in March and following President Joe Biden’s unveiling of an infrastructure spending plan worth $2 trillion.

The Bureau of Labor Statistics will publish its nonfarm payrolls report for March on Friday at 8:30 a.m. ET, providing the most detailed look at how hiring fared throughout last month. The backdrop is promising. March had warmer weather, and a faster rate of vaccinations led some states to partially reopen for the first time since the winter’s dire surge in cases. Coronavirus case counts started to swing higher at the end of the month but largely stayed at lower levels.

Democrats’ $1.9 trillion stimulus plan was also approved early last month and unleashed a wave of consumer demand and aid for small businesses. Sentiment gauges surged to one-year highs, and Americans strapped in for a return to pre-pandemic norms.

Consensus estimates suggest March had the strongest payroll gains in six months. Economists surveyed by Bloomberg said they expected nonfarm payrolls to climb by 660,000, which would be nearly double the 379,000 gain seen in February. The unemployment rate is forecast to dip to 6% from 6.2%.

“We believe a vaccine- and reopening-related rebound in labor force participation is likely to start this month, and this could limit the magnitude of the decline in the jobless rate,” Goldman Sachs led by Jay Hatzuis said in a note.

US 10-year Treasury yields held steady around 1.67%, having hit 1.776% last week, their highest in almost 15 months. Bond yields have risen steadily this year, as prices have fallen, in line with a growing conviction among investors that economic recovery is picking up, which will reignite inflation.

The combination of accelerating growth and inflation makes it less attractive to own government bonds.

The dollar meanwhile traded fairly steadily against a basket of major currencies. The dollar index was last down 0.1% on the day, but still holding close to its highest in five months.

“Friday’s highly-anticipated non-farm payrolls report comes out at a bit of an awkward time; for the first time in six years, the April jobs report falls on the Good Friday holiday, meaning that many major markets will be closed,” CityIndex strategist Matt Weller said in a note on Thursday.

“As a result, readers who are at their desks trading the FX or bond markets may see less liquidity than usual and the post-release move may peter out sooner than usual as traders who are watching the markets look to duck out early to enjoy a long holiday weekend,” Weller said.

Bitcoin nudged at $60,000 for the first time in two weeks, as risk appetite pushed investors into more volatile assets. It was last up 1.2% around $59,540, having gained over 8% in the last week.

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