US markets eye April employment data with job gains coming in above estimates

8:40 am: April job data points to ‘unstagflation’

April was another strong month for job gains in the U.S., with the Labor Department reporting that non-farm payroll (NFP) employment increased by 428,000, marking the 12th straight month of job gains above 400,000.

The job figures exceeded the median analyst estimate from a Bloomberg survey of economists of 383,000 jobs.

The unemployment rate remains unchanged at 3.6% or 5.9 million people, comparable to the country’s pre-pandemic unemployment rate of 3.5% recorded in February 2020.

According to the Labor Department, job growth was led by gains in leisure and hospitality, manufacturing, and transportation and warehousing.

In an initial reaction, AvaTrade chief market analyst Naeem Aslam said “unstagflation” was the word that came to mind when looking at the jobs data.

“Basically, the US NFP number failed to bring any flare into the market. We have seen little to no reaction in the gold prices and in the equity futures, ”Aslam said.

“However, here is something that is important to note, and that the US NFP data isn’t going off the rails and this is a positive news for the US economy.”

“The only thing that matters for the market is the inflation reading.”

6.30am: Futures point to further falls

US stocks were expected to open lower on Friday, retreating further after yesterday’s steep falls amid continuing fears that rising price pressures and a series of interest rate hikes are a threat to economic growth, with April non-farm payrolls due for release today.

Investors are clear that the Federal Reserve is set on a path of aggressive interest rate hikes after it decided on a 50 basis point (bp) increase on Wednesday, the first such hike in two decades.

Futures for the Dow Jones Industrial Average fell 0.2% in pre-market trading, while those for the broader S&P 500 index shed 0.3%, and contracts for the Nasdaq-100 lost 0.5%.

“The Federal Reserve ‘magic’ didn’t last long, and the US stocks recorded the worst day of the year yesterday, after posting the biggest gains of the year the day before, under the pretext that the Fed wouldn’t raise the rates by 75bp points, ”said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, noting that the Fed is expected to deliver a 50 bps rate increase at its next two meetings.

On Thursday, the Dow Jones Industrial Average and the S&P 500 dived over 3.5% while the Nasdaq Composite slumped over 5% as technology stocks took a heavy beating.

The closely watched US non-farm payrolls report, due at 8.30am ET, could trigger further stock price falls if the labor market in the world’s biggest economy continues to strengthen.

“Even though the Fed will turn a blind eye on softening jobs data in the coming months to focus on its fight against inflation, a strong NFP data could further revive the Fed hawks and the prospects of a more aggressive Fed over the next couple of meetings, whereas soft data could bring in some Fed doves, ”noted Ozkardeskaya

“But again, the Fed must make a choice as it can’t boost growth and inflation at the same time,” she added.

The prospect of spiraling inflation and higher interest rates are making investors worry that the wider economy will weaken even as inflation stays elevated, debting corporate America in the process.

Benchmark crude oil prices continued higher, signaling that commodity price pressures are here to stay. WTI futures were up 2.2% at $ 110.62 a barrel while Brent crude futures rose 2.2% to $ 113.29 a barrel.

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