A Reuters Open Interest newsletter |
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Making sense of the forces driving global markets |
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Stocks sank on Thursday and another surge in oil prices sent bond yields shooting higher, as the spiraling conflict across the Middle East raised investor fears over energy supplies, higher inflation and slower growth. More on that below. In my column today I offer a reminder that, amid the fog of war, economic fundamentals can't be forgotten completely. Friday's U.S. payrolls data, and any hint of AI's impact on jobs, will avert eyes from the Middle East, at least temporarily. I'd love to hear from you, so please reach out to me with comments at jamie.mcgeever@thomsonreuters.com. You can also follow me at @ReutersJamie and @reutersjamie.bsky.social. |
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- STOCKS: Solid rebound in Asia - Japan +2%, South Korea +10% - but Europe, Americas slide into the red. Nasdaq only down 0.3%, Russell 2000 -2%; Brazil -2.5%, Mexico -3%.
- SECTORS/SHARES: Eight S&P 500 sectors fall, three rise. Industrials, consumer staples, healthcare, materials -2% or more. Caterpillar, Goldman Sachs -3.5%, IBM +2.5%.
- FX: Dollar higher across the board, EM FX hit hardest with ZAR and CLP down ~2%. AUD the biggest G10 decliner -1%.
- BONDS: U.S. yields rise as much as 6 bps, curve steepens slightly. UK yields +10 bps, now +30 bps this week. 2-year Schatz yield +25 bps this week, most in three years.
- COMMODITIES/METALS: Oil jumps to highest since July 2024. Brent +5%, WTI +9%; now up 17-20% on the week, the most since Feb 2022. Gold -1.5% on firm dollar, yields.
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* Learning the 'transitory' lesson As energy prices soar, markets are betting that central bankers won't repeat the 2021-22 playbook of looking through supply shocks and a subsequent surge in "transitory" inflation. They've learned that lesson, right? That appears to be traders' bet - only one Fed rate cut this year is baked in now, and that's not until October; another BoE cut isn't fully priced at all; the ECB is more likely to hike than cut; and the RBA could even hike again this month. * No room for complacency There was a glimmer of hope on Wednesday that back channel U.S.-Iran diplomacy might pave the way for peace to break out in the Middle East. Traders seized upon it, bought back beaten down stocks, and Europe and Wall Street rallied. Predictions are dangerous at the best of times, but that looks like a false dawn. The war is spreading, messy, and getting more entrenched. Energy prices and bond yields are spiking, and risk assets are feeling the heat. Yet the Nasdaq is flat on the week. Justified calm, or complacency? * A job lot With investors' focus firmly on the market implications of events in the Middle East, economic fundamentals are understandably taking a back seat. They should be a driving force, however, at 8:30 Eastern Time on Friday, when the U.S. Bureau of Labor Statistics releases the February jobs data. A strong report will let Fed officials breathe more easily, while signs of cracks in the labor market will be tricky to navigate - yields are spiking on the energy supply shock, yet the curve is the flattest this year. Stagflation on the horizon? |
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US jobs data forces gaze back from Mideast mayhem to AI 'doom' |
With war still raging in the Middle East, investors on Friday will, at least temporarily, turn their attention back to more familiar economic ground: U.S. jobs data. While it may be too early to see concrete evidence of AI-related labor market disruption, the jobs report will still be closely scrutinized for warning signs, including weak job growth, or even net job losses, and an unwelcome rise in the unemployment rate. |
Indeed, from this point on, the monthly payrolls reports and other labor market indicators such as the "JOLTS" job openings, layoff figures and weekly jobless claims are likely to be lightning rods for the "AI doom" debate over whether the technology will end up destroying jobs, demand and economic growth. |
What could move markets tomorrow? |
- Developments in the Middle East
- Reserve Bank of Australia Deputy Governor Andrew Hauser speaks
- South Korea inflation (February)
- European Central Bank officials scheduled to speak include President Christine Lagarde, board members Isabel Schnabel and Piero Cipollone, and Pierre Wunsch
- Euro zone GDP (Q4, revised)
- Germany industrial production (January)
- Canada PMIs (February)
- U.S. non-farm payrolls (February)
- U.S. retail sales (January)
- U.S. Federal Reserve officials scheduled to speak include Governor Stephen Miran, San Francisco Fed President Mary Daly, Philadelphia Fed President Anna Paulson, Boston Fed President Susan Collins, and Cleveland Fed President Beth Hammack
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. |
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