EU PMI data inline
The market looks to jobless claims
Nikkei 0.94% Dax 1.53%
UST 10Y 0.66
Asia and the EU
UK Services PMI
North America Open
USD Weekly Jobless Claims 8:30
Markets were treading water in Asia and early European trade with stock index futures flat to negative as investors digested the massive recent gains that pushed indices to record highs.
There was little fresh econ data to move prices as the EU Final PMI came in essentially inline at 50.5 versus 50.1 eyed while the UK PMI services data came in slightly lower at 58,8 vs 60.1 forecasts but still well above the 50 boom/bust level.
The rally in equities has been relentless with investors ignoring and sense of valuation as stocks passed their dot com peak in relative value to GDP. The momentum has been driven by the very accommodative policy of the Fed and the strong belief that the COVID re-open trade would quickly take economic activity to pre-pandemic levels.
So far the bulls have been unabashedly correct in their forecast of demand. Aggregate demand has come roaring back as pent up consumption has seen sales in durables (especially cars and housing) recover very quickly. However, while demand has come back jobs have not. Yesterday’s disappointing ADP numbers which saw jobs recover lead than half their expected target may be a sign that businesses are trying to do more with less.
Today weekly jobless claims – and more importantly the ISM Non-Manufacturing data could be key tells to tomorrow’s NFP report. The employment component of the ISM report is usually one of the better gauges of the over labor demand picture and if it shows a tepid recovery market bulls could have second thoughts about extending the rally.