A look at the day ahead in U.S. and global markets from Mike
Dolan
Any investor trepidation about a slowing U.S. economy is once
again being offset by renewed interest rate cut hopes - seeing
the third day in row that Wall St stocks have turned around
early losses to end higher by the close.
In a week packed with employment updates, Tuesday's
hat-trick of late market rallies followed further signs of a
cooling U.S. labor market. U.S. job openings fell more than
expected in April to the lowest in more than three years, with
the ratio of vacancies to job-seekers also back at mid-2021
levels.
With one eye on Friday's May employment report, Wednesday's
release of ADP's private sector job survey is next on the slate
and a modest slowdown in job creation to 175,000 is forecast.
But already Federal Reserve rate cut speculation is back on
the boil - with 45 basis points of 2024 Fed easing back in the
futures strip and a near 80% chance of pre-election first move
priced by September.
Aided by this week's plunge in energy prices and
crude oil back at February levels, U.S. Treasury yields
ebbed further on Tuesday before steadying today as
they await the big jobs release later in the week.
Whatever the Fed does, the Bank of Canada is set to beat it
to the punch and is widely expected cut as soon as Wednesday.
With inflation back in the BoC's 1-3% target range and
following disappointing early year growth readings, money
markets have priced an 80% chance of a quarter point cut later
today and three quarters of economists polled also expect one.
Reflecting the forecasts, the Canadian dollar was
steady ahead of the decision.
More broadly, monetary easing around the world is the main
reason renewed Fed rate cut speculation has done such little
damage to the U.S. dollar.
With a European Central Bank rate cut also widely expected
on Thursday, four of the G7 economies would then be in easing
mode. And following rate cuts in Switzerland and Sweden already
this year, four central banks of the G10 most traded currencies
will likely have cut by the end of this week.
Even though the Bank of Japan is heading in the opposite
direction, the yen fell back again on Thursday. Japan's
inflation-adjusted 'real' wages fell 0.7% in April from a year
earlier - extending a record streak of 25 consecutive monthly
declines - but slowed the pace of decline as the BoJ watches
closely.
Japanese and Chinese benchmark stocks were
in the red on Wednesday - bucking a more upbeat day for other
bourses across Asia and Europe.
China markets were dragged lower by consumer and property
shares, despite an unexpected pickup in service activity in May.
China's services activity in May accelerated at the quickest
pace in 10 months, while staffing levels expanded for the first
time since January, a private sector survey showed on Wednesday.
Indian shares recovered some of Tuesday's withering
election-related losses, jumping back 3% after two key allies
pledged their support to form a new government following a
narrow win for Prime Minister Narendra Modi's alliance.
Back on Wall St, S&P500 futures were higher ahead of the
opening.
And a potential rival to the New York Stock Exchange was
gaining some attention.
A group backed by BlackRock ( BLK ) and Citadel Securities
is planning to start a new national stock exchange in Texas, a
spokesperson for Citadel Securities said on Tuesday.
The Texas Stock Exchange, which has raised about $120
million, plans to file registration documents with the
Securities and Exchange Commission later this year, The Wall
Street Journal reported.
Key diary items that may provide direction to U.S. markets later
on Wednesday:
* Bank of Canada policy decision
* US May ADP private sector jobs report, US May service sector
surveys from ISM and S&PGlobal
* US President Joe Biden visits France for 80th D-Day
anniversary
* US corporate earnings: Dollar Tree, Lululemon, Campbell Soup,
Brown-Forman
(Editing by Bernadette Baum)