Markets Look Ahead to Labor Data

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EU PMI improve
Markets flat
Nikkei -0.75%% Dax 0.66%
UST 10Y 0.683
Oil $40/bbl
Gold $1787/oz
BTCUSD $9192

Asia and the EU

North America Open
USD ADP 8;15
USD ISM Manufacturing 10:00

Its been a very quiet flat session in Europen dealing with equities slightly lower and currencies mixed as markets basically tread water ahead of US employment data later today.

On the eco front in Europe, the final PMI prints came in just a ta better at 45.2 versus 44.6 eyed, and in Germany, the unemployment change also posted better results at 62K versus 120K forecast. The data confirms the slow but clear return back to work and economic activity as the threat of virus recedes.

Still despite the rebound economic activity remains in contraction and it is likely to take months for activity in the EU to resume anything resembling pre-COVID levels. The EURUSD saw little reaction to the news but held at the 1.12000 level.

Equities were lackluster throughout staying slightly below yesterday’s close and weakened into the US open. Yesterday end of day ramp was likely driven by end of quarter window painting but now the markets must once again focus on growth in the US which looks problematic at best. The recent spike in coronavirus cases is already forcing some states to rethink their opening policies restricting restaurants, bars, and movie theaters from re-opening.

All of this start and stop policy change is likely to take its toll on business activity and although the market anticipates that today’s ADP labor data numbers will show a strong rebound to 2.8M jobs gained the market may look past the number if it anticipates that many of those jobs will be vulnerable to layoff the month following. If the number misses expectations it will provide a perfect excuse for even greater selling as stocks have not yet seen any correction after their massive rally over the past six weeks and it is long overdue.

Boris Schlossberg
Managing Director

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