Stocks mixed ahead of Eurozone inflation, US jobs data

Stocks start the new quarter in a cautious fashion as Russia developments, a slowdown in China and high impacting data could make for a busy Friday.

• Oil prices fall again as the US will release 1 million barrels of oil a day for 6 months
• Fears of a slowdown in China drag Asian equities lower
• Eurozone inflation and US non-farm payrolls are in focus

After steep losses yesterday, European stocks are heading for a mixed start to the new quarter, when Putin said that payments for gas must be in Rubles from today or gas supply will be affected.

Investors will be glad to see Q1 in the rear view mirror, a quarter that saw European stocks book their biggest quarterly drop since the pandemic hit in 2020.

Looking ahead, this quarter certainty has its challenges with Putin’s war and all the uncertainty that comes with it, in addition to surging inflation and concerns over growth in China. There are some signs that oil prices could steady around the $100 mark, rather than continue the march higher, which is a positive.

The Biden administration will release 1 million barrels a day of oil from its strategic reserves, over six months, the largest release on record. The steady drip of oil into the market should help ease supply concerns, more than a one-off large release. WTI crude oil trades below $100 per barrel.


Chinese slowdown fears

Data overnight from China showed that factory activity in March contracted at the sharpest rate in two years, owing to the resurgence of COVID and the economic fallout from the Ukraine war. The Caixin manufacturing PMI dropped to 48.1, down from 50.4 in February. The figure 50 separates expansion from contraction. The deterioration was broadly in line with the official PMI released on Thursday. The data suggests that the Chinese economy is at risk of slowing, particularly as authorities continue to impose lockdown conditions to prevent the spread of COVID. A cut to the reserve requirement ratios by the PBoC this month is looking increasingly likely. Asian shares fell on Friday amid growing concerns of a recession.


Eurozone inflation

Looking ahead, eurozone inflation data is set to be the central focus in the European session. Inflation is expected to rise to 6.6% YoY in March, up from 5.9% in February. Given that Germany reported inflation well above forecasts at 7.6%, there is a good chance that Eurozone inflation will also top estimates. Hot inflation could raise expectations of a more hawkish ECB, aiding the euro higher.


US non-farm payroll

Looking ahead to the US session, the non-farm payroll is expected to show that 490k new jobs were added in March, after strong months of job gains in January and February, indicating that the labour market is in rude health. Unemployment is expected to slip to 3.7%, and wage growth heads higher towards 5.5%. Solid job creation comes as inflation keeps rising and could cement a 50 basis point rate hike in May, potentially lifting the USD and dragging on Gold. Ahead of the NFP release, USD is trading higher, and Gold is paring yesterday’s gains around $1930.