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Friday’s rally on Wall Street should be supportive for global equities, while the markets will continue to digest the surprising April jobs report. Though job gains were much weaker than expected, the overall employment report was not nearly so bad. Indeed, the markets may have gotten too far over their skies.
Key Drivers for the Week of May 3, 2021
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- Strong data, earnings, vaccines, support upbeat outlooks, but pandemic risks remain
- U.S. employment report, ISMs expected to affirm robust growth into Q2
- Heavy earnings slate: Pfizer, Lowes, ConocoPhillips, Hilton, Berkshire Hathaway
- Fedspeak from Chair Powell, Kaplan, Daly, Evans, and Mester
- Canada jobs data headlines, trade, building permits, Ivey PMI; BoC’s Madklem speaks
- Japan on Golden Week holiday Monday-Wednesday; services PMI, auto sales due
- Central banks steady: RBA at 0.1%; Bank of Thailand at 0.5%; Bank Negara at 1.75%
- Asia slate also has China trade data, CPIs from Korea, Taiwan, Indonesit, Thailand
- ECB monthly report; Lagarde, Lane, Schnabel to confirm accommodation
- Eurozone retail sales, final PMIs expected to be firm, confirm end of Q4/Q1 recession
- German retail sales, industrial production, trade, manufacturing orders due
- BoE expected on hold; upgrades to GDP and inflation in Monetary Policy Report
- UK lending, final PMIs; local elections with a focus on pro-independence Scottish parties
- Switzerland has employment, manufacturing PMI, CPI, and consumer confidence
The very modest gain does not signal a weakening recovery, but more likely a shortfall in labor supply for a number of reasons. There is plenty on which to focus this week including data on CPI, retail sales, and industrial production. There is also the May refunding auctions from the Treasury.
And there is plenty of Fedspeak to hit the tape, though we don’t expect the employment data changed any of the policymakers’ outlooks. A strong earnings season is also winding down.
The dollar has managed to find a toehold after plunging on Friday on the massive U.S. jobs report disappointment. Markets were blindsided by the data, focused too much on burgeoning demand while taking their eye off the gaping pandemic-era supply-side anomaly in the labor market.
However, the trend is still BEARISH and is close to breaking through support at 90.
We believe that that is the strongest indicator of rising inflation.
Base metal prices have continued to surge to fresh trend highs.
Oil prices are off recent highs, with the market being affected by the Covid situation in India (which is among the world’s biggest imports of oil), but the bigger-picture market prognosis remains bullish given the success of vaccinations and ramping up supply capacity for vaccine production.
However, the shutdown of the Colonial Pipeline will likely increase gas prices in the near future. The US government declared a state of emergency late on Sunday, lifting limits on the transport of fuels by road in a bid to keep gas supply lines open as fears of shortages spiked after the continued shutdown of the Colonial Pipeline.
We do expect a general BULLISH trend in the markets as confidence is growing that the global economy is turning the corner to stronger growth, even as infections still surge in some regions.
Eurozone confidence data should provide further evidence that the recovery is underway. In Asia, the covid crisis in India and Japan will remain on the radar amid a thin calendar.
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