Wall Street returns for reaction to Friday’s NFP

It could be a muted start in Europe with London markets closed, but the action should pick up in the afternoon as Wall Street returns from a 3-day weekend.

Non-farm payrolls data for March narrowly missed expectations at 236k vs the 238k expected. The dollar and treasury yields rose in response while S&P 500 futures drifted higher on the news but the first response in regular trading hours will come today since the NYSE and Nasdaq were closed for Good Friday.

Key Factors for Today

• UK and some European markets are closed for Easter Monday
• US futures point to a higher start on Wall Street
• Asian markets mostly higher

• Friday’s US jobs report comes in line with expectations (236k)
• Banks kick off US 3rd quarter earnings season later this week
• US CPI and Fed minutes main data points this week

Market movers

• GBPUSD dips back under 1.245 range-resistance
• Gold rolls over from weekly high of $2032, closes above $2k
• Brent crude finishes big week near its high ~ $85 pb
• Nas100 rebounds on Friday after 2-day drop, retakes 13k
• FTSE 100 closes above 7700, new 3-week high

Investors divided by jobs reports

Taken in isolation, Friday’s jobs data should be good news for those worried about a US recession. Non-farm payrolls grew more-or-less as expected and the unemployment rate ticked lower to 3.5% while wages grew 4.2% y/y, the lowest since June 2021.

However, the data came at odds with ADP private payrolls data released mid-week which showed a marked deterioration in the labour market. Private sector hiring was up by 145,000 in March, well below the 210,000 average forecast and the 261,000 prior.

Still, with unemployment this low, markets are pricing in another quarter-point rate rise from the Federal Reserve at the next meeting in May. This is despite a surprise decision from the Reserve Bank of Australia to pause rate hikes at its meeting last week. This monetary policy divergence is playing out in AUD/USD which dropped for 3 days, erasing a breakout to a 1-month high.

US bank earnings after SVB

This week the big American banks, including JP Morgan, Bank of America, Citigroup and Wells Fargo will report first-quarter earnings. The reporting period will include the demise of Silicon Valley Bank and Signature Bank but this is unlikely to have had any marked impression on results.

The important information will come in the form of guidance for Q2 and beyond in light of the bank failures. The big TBTF banks have reportedly benefitted from deposit flight from US regional banks but may be using this as an extra buffer against future crises rather than lending it out.

The performance of the banks will also be a bellwether for the general health of the US economy as many continue to expect an imminent recession.

Econ Calendar

• IMF Meetings (All Day)
• US Final Wholesale Inventories m/m (3 pm)
• FOMC Member Williams Speaks (9.30 pm)

Earnings

• Tilray
• Pricesmart inc
• SHIFT Inc
• Goodyear Tire & Rubber Co.