Daily Market Update: Mixed US Data
Global economic growth fears continue to linger in financial markets with equity markets posting further declines yesterday.
The Euro Stoxx index of the top fifty blue-chip companies in the Eurozone posted a 1.2% decline yesterday. Meanwhile after a mixed set of economic data releases form the US; Wall Street’s S&P 500 was 0.6% lower at the closing bell. Private sector employment growth slowed more than expected last month according to the latest ADP report. There was a net gain of 156k jobs created in April, some 40k below both the consensus forecast and the previous month’s figure. This represented the weakest pace of employment growth in three years. However there was more encouraging news from the US services sector. The ISM non-manufacturing index, which is mostly services, exceeded expectations with growth accelerating from 54.5 in March to 55.7 in April. The latter represents the strongest reading for 2016 and offers some hope that Q2 will be notably better than Q1’s disappointing growth rate. Markets are braced for tomorrow’s key release of the week, the US nonfarm payrolls report tomorrow with economists pencilling in a 200k net gain in jobs in April.
The health of the services sector is in focus elsewhere. In China, the pace of service sector growth eased in April according to the Caixin PMI released this morning. The latest print of 51.8 compares with 52.2 in March. With both the manufacturing and services sectors reporting a slowdown the combine composite measure slowed from 51.3 to 50 8. The UK services PMI is the key release of the week for the UK. Following a contraction in the manufacturing PMI earlier in the week, yesterday’s construction PMI signalled the slowest rate in activity in close to 3 years. Both the manufacturing and construction surveys were weaker than expected. Today’s services PMI could make this three in a row. Expectations are already low for April following subdued rates of growth in February and March. The expectation for April is 53.5, any downside surprise this morning is likely to see GDP forecasts for Q2 lowered.
On the markets, Brent crude oil has regained some of its losses over the last 24 hours. Having dipped below $45pb yesterday the price of a barrel of oil is back at $45.6 as I write. On the currency markets, the dollar is firmer this morning against both the euro and sterling. EUR/USD was just shy of $1.15 at yesterday’s open and is currently changing hands at $.1.144. GBP/USD has slipped from $1.456 to $1.447 over the same time horizon. Meanwhile EUR/GBP remains broadly unchanged at 79p.