Investors expect a hawkish stance from the RBA. Natural gas prices returned to growth :: InvestMacro

By JustMarkets 

On Friday, the Dow Jones (US30) was up 1.18% (for the week +1.03%), while the S&P 500 (US500) was up 1.26% (for the week +0.27%). The NASDAQ Technology Index (US100) closed positive 1.99% (for the week +0.93%). The US stocks rose thanks to a weaker-than-expected April employment report, which increased expectations of a Federal Reserve interest rate cut in September.

The US jobs report recorded a 175,000 increase in Non-farm payroll employment for April, compared to the consensus forecast of 240,000, while March data was revised slightly upward to 315,000 from 303,000. In the household survey, the unemployment rate rose to 3.9% from 3.8%, with a slight increase in employment. Average hourly earnings rose 0/2% for the month, slightly below expectations of 0.3%, with year-over-year growth slowing to 3.9% from 4.1%. The data suggests the labor market is cooling, and wage pressures are slowing. According to economists, given the current situation, the US Fed will likely start cutting rates in September.

Canada’s services PMI for April 2024 came in at 49.3, up from March’s 46.4. This is the highest reading since June but is still indicative of contraction. The slower decline in activity is partly due to a stabilization in new orders. The latest data showed no change in new work, ending eight months of contraction.

Equity markets in Europe were mostly up on Friday. The German DAX (DE40) rose by 0.59% (for the week +0.45%), the French CAC 40 (FR40) closed Friday up 0.54% (for the week -1.42%), the Spanish IBEX 35 (ES35) declined 0.16% (for the week -1.72%), the British FTSE 100 (UK100) closed positive 0.51% (for the week +0.90%).

The S&P Global UK Services PMI for April 2024 jumped to 55 from 53.1 the previous month, indicating a sixth consecutive period of growth at the sharpest pace in over a year. Service providers saw a sharp increase in new orders amid changing economic conditions for clients. Combined with a decline in work backlogs, business activity also increased significantly. Based on signs of recovering customer demand, upcoming marketing initiatives, and long-term expansion plans, companies remained optimistic about the outlook for business activity in the coming year.

The Eurozone unemployment rate for March 2024 was a record low of 6.5%, in line with market expectations and the previous three months. The unemployed fell by 94 thousand from the previous month to 11.087 million. Among the major Eurozone countries, Spain recorded the highest unemployment rate at 11.7%, followed by France at 7.3% and Italy at 7.2%. In contrast, Germany recorded the lowest rate of 3.2%. A year earlier, the unemployment rate was slightly higher at 6.6%.

Norges Bank (NB) kept its key interest rate unchanged at 4.5% in May 2024 for the third consecutive time, in line with market expectations, and said the rate will remain at the current level “for some time.” Norway’s central bank said monetary policy is tight enough to have a tightening effect on the economy, keeping growth low and enough to bring inflation back to target within a “reasonable time horizon.” However, policymakers noted they would be willing to hold another rate hike if monetary conditions were insufficient to bring inflation back to the bank’s target level.

The US natural gas (XNG) prices rose more than 5% to above $2.1 per mmbbl on Friday, nearing a three-month high thanks to rising exports and production cuts. Major energy giants like EQT and Chesapeake Energy have cut drilling and production, leading to a 9% decline in US gas output this year. Gas production fell to 98.1 Bcf/d in April from a record 105.5 Bcf/d in December 2023 and continued to decline in May.

Asian markets were mostly up last week. Japan’s Nikkei 225 (JP225) rose by 0.45%, China’s FTSE China A50 (CHA50) decreased by 0.25% for the week, Hong Kong’s Hang Seng (HK50) jumped by 6.57% for the week, and Australia’s ASX 200 (AU200) was positive 0.55%.

The Australian dollar holds above $0.66, which is near its strongest level in two months, as investors await the Reserve Bank of Australia’s (RBA) policy decision this week. The central bank is expected to leave interest rates unchanged, but markets are betting it will take a more hawkish stance due to recent strong domestic inflation figures. Australia’s inflation rate fell to 3.6% in the first quarter from 4.1% in the previous quarter, slowing for the fifth consecutive quarter but beating forecasts of 3.4%.

S&P 500 (US500) 5,127.79 +63.59 (+1.26%)

Dow Jones (US30) 38,675.68 +450.02 (+1.18%)

DAX (DE40) 18,001.60 +105.10 (+0.59%)

FTSE 100 (UK100) 8,213.49 +41.34 (+0.51%)

USD Index 105.08 -0.22 (-0.21%)

Important events today:

• – China Caixin Services PMI (m/m) at 04:45 (GMT+3);
• – Germany Services PMI (m/m) at 10:55 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – Eurozone Producer Price Index (m/m) at 12:00 (GMT+3);
• – SNB Board Member Jordan Speaks at 15:25 (GMT+3);
• – US FOMC Member Barkin Speaks at 20:00 (GMT+3);
• – US FOMC Member Williams Speaks at 20:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.