Buy the dip, we can worry about jobs later

A look at the day ahead in European and global markets

By Wayne Cole, Chief Correspondent, Treasury

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It's been a case of buy the dip so far on Monday as U.S. and European stock futures edge up, along with the dollar. The Nikkei suffered a delayed reaction to Friday's Wall Street rout and a jump in the yen, but the rest of Asia fared better.

Early trade saw Fed fund futures price in 65 bps of interest rate cuts by December, but that's back to 60 bps now. That's still a world away from the 33 bps seen before Friday's weak U.S. payrolls report, and September is still 83% for an easing.

The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, May 12, 2025. REUTERS/staff

In fact, the 25 bps drop in two-year yields on Friday was essentially the market doing a Fed rate cut for them, given how borrowing costs in the States are tied to yields not the funds rate.

Ten-year yields also fell a steep 14 bps but met resistance around 4.20%, a level they have repeatedly struggled to break under since October last year.

Longer term, downward revisions to payrolls have seriously challenged the U.S. claim to economic out-performance and the dollar's crown of exceptionalism. The latter was also tarnished by President Trump firing the head of the Bureau of Labor Statistics, an institution with an invaluable reputation for scrupulous honesty that won the trust of investors worldwide.

Or, at least, it used to be. Now, Trump says he will chose a new head for the BLS in the next few days. Will it be an independent-minded statistician dedicated to providing credible data, or a Trump loyalist eager to please their master?

U.S. assets enjoy a trust premium that will be really hard to maintain as Trump bends all levels of government to his will.

Graphics are produced by Reuters.

Trump also just floated the idea of using some of the windfall from tariffs to pay "dividends" to a lucky group of Americans chosen by him - no doubt with special cheques bearing a "TRUMP" logo.

So you slap taxes on everyone that buys imports, whether they have a choice or not, and then use part of the revenue to pay money to those you favour, in your name rather than the government that's actually doing the work.

Talking of tariffs, a U.S. appeals court late last week heard arguments on the legality of Trump's "reciprocal" levies and sounded inclined to support the original ruling that the tariffs were illegal.

Such a ruling would likely still go to the Supreme Court, which has tended to favour unbridled presidential power. Yet, should the tariffs be found illegal, not only would all the trade deals agreed or underway be null and void, but the Treasury would have to refund all the money collected.

Wouldn't that be fun...

Graphics are produced by Reuters.

Graphics are produced by Reuters.

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