June 05, 2024

“All eyes are on the upcoming ECB rate decision after softer-than-expected US jobs data bolstered the case for a rate cut.”

Sam Cornford – Head of Trading

Main Headlines

Global yields continue to decline as markets grow more pessimistic about US growth. The JOLTS Job Openings data fell significantly below expectations, causing some volatility but minimal impact on yields, which have dropped for four consecutive days from 4.6% to 4.35%. Better-than-expected factory orders may have mitigated the decline. Nonfarm payroll figures, expected to show further weakness, will be released on Friday.

Rishi Sunak and Labour Party leader Keir Starmer clashed over taxes in the first TV debate of the UK election campaign. Sunak, under pressure to gain momentum after polls indicated a potential Conservative defeat on July 4, accused Starmer of planning to raise taxes, claiming a Labour government would cost households an average of £2,000. Starmer dismissed this as “garbage” based on fictitious policies, highlighting that the tax burden has increased under Sunak’s leadership.

GBP

Sterling is well bid against most major currencies this morning. Blackstone has struck a deal with housebuilder Vistry to purchase approximately 1,750 new rental homes, as major investment managers increasingly see opportunities in the UK’s undersupplied rental market. The £580 million deal, along with a minority investment partner Regis, marks the second major transaction with Vistry in eight months, totalling £1.4 billion and funding over 4,500 homes.

EUR

The euro is weaker than most major currencies in the early morning trade. European stocks are expected to open higher today, with investors anticipating the upcoming ECB meeting. On the data front, final PMI figures for the euro zone in May, indicating services and manufacturing activity, are due. The ECB is widely expected to cut interest rates for the first time since 2019 at Thursday’s meeting, though investors will closely watch to see if last Friday’s slightly higher-than-expected euro zone inflation figures influence the central bank’s decision.

USD

The dollar is stronger against the euro and weaker against sterling this morning. Oil prices hovered near four-month lows in Asia on Wednesday as markets digested an OPEC+ decision to increase supply later this year, along with a rise in US crude and fuel stocks. Brent crude futures were up 4 cents at $77.56 a barrel by 0307 GMT, while US West Texas Intermediate crude futures remained flat at $73.25 a barrel. Both contracts fell nearly a dollar on Tuesday to their lowest settlement levels since early February, having declined around $3 a barrel on Monday.

Markets

European stock futures advanced as signs of a cooling US labor market buoyed Federal Reserve rate-cut bets. Treasury yields climbed after their largest two-day drop this year. The Euro Stoxx 50 futures gained 0.5% while contracts for US equities also edged higher. Stocks in Asia were mixed, with India ourperforming as an alliance partner of Prime Minister Narendra Modi’s party affirmed support to form a coalition government. The Nifty 50 Index rose more than 2%, recouping some of Tuesday’s loss when the gauge fell the most in four years.

Main Economic Events (All Times CET)

8:45 a.m.: France April Industrial Production
9:50 a.m.: France May HCOB Composite, Services PMI F
9:55 a.m.: Germany May HCOB Composite, Services PMI F
10:00 a.m.: Eurozone May HCOB Composite, Services PMI F
10:30 a.m.: UK May S&P Global/CIPS UK Composite, Services PMI F
1:00 p.m.: US MBA Mortgage Applications
2:15 p.m.: US May ADP Employment Change
3:00 p.m.: Brazil May S&P Composite, Services PMI
3:45 p.m.: US May S&P Composite, Services PMI F
3:45 p.m.: Canada Rate Decision
4:00 p.m.: US May ISM Services Index
Poland Rate Decision

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