Week ahead: US jobs data to guide Fed hike expectations

May ends with indices showing mixed form – tech has extended gains for the Nasdaq, whilst the Dow and FTSE have languished. This week the focus is again on inflation, this time in the Eurozone, and on the monthly labour market report from the US. Nonfarm payrolls have consistently pointed to a resilient jobs market, whilst inflation is increasingly being driven by stronger wages. The question this week is whether there is enough strength to justify another rate hike by the Fed at its June meeting, which is just around the corner.

Here are the week’s key events:

Monday

Plenty of bank holidays with many of the major exchanges closed for the day – likely to keep liquidity thinner than usual across most markets. Whether or not debt ceiling negotiations are ongoing, or a deal is struck, markets are likely to remain jumpy on what to expect next from the US with key jobs data ahead.

Tuesday

The European session kicks off with German retail sales data and the UK’s Nationwide house price index, with traders keen to assess whether rate hikes are weighing on the property market. Swiss GDP and Spanish flash CPI data will also be watched. CB Consumer Confidence data from the US is the highlight later in the session. Consumer confidence fell in April and the expectations index slumped, whilst 1yr ahead inflation expectations remain elevated at 6.2%.

Earnings: Hewlett Packard Enterprise (HPE), HP (HPQ)

Wednesday

On inflation watch again with first the latest BRC shop price index in the UK followed by the Australian CPI report – will the RBA have to keep going with hikes? Preliminary consumer price inflation from Germany, France and Italy is due too. Risk assets will look to China’s manufacturing and services PMIs – has the second-largest economy’s recovery got any legs? Canada’s GDP report and the latest JOLTS job openings from the US will be the main events in the North American session.

Earnings: CrowdStrike (CRWD), Salesforce (CRM)

Thursday

The day is chock full of economic releases starting with the final Japanese factory gate survey and China’s Caixin manufacturing index. Various European PMI releases are scheduled ahead of the key flash Eurozone CPI inflation report. Policymakers are still scratching their heads over the persistence of inflation - Euro area annual inflation was 7.0 % in April 2023, up from 6.9 % in March. In the US, ADP employment numbers, weekly jobless claims and the latest ISM manufacturing PMI survey are among the major economic releases.

Earnings: Broadcom (AVGO)

Friday

Jobs day: US nonfarm payrolls data is the highlight for the whole week as investors look ahead to see whether there is any pressure on the Federal Reserve to pause or hike rates in June. April’s report came in hot with +253k jobs created during the month, smashing expectations and pointing to a very resilient labour market. Also on the minds of Fed policymakers is the wage component, which jumped to +0.5% from +0.3% month on month, signalling concerns about a wage-driven inflation that is becoming entrenched.