- 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.
“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.
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.