May 26 (Reuters) – Key jobs numbers in the United States, Chinese business activity data and European inflation figures provide further clues to the pull and push factors affecting the world’s top economies amid the debt ceiling saga in Washington goes on.
In Turkey, voters are going to the polls to choose their next president, and tech investors are looking for undervalued opportunities in an overvalued space.
Here’s a look at next week’s markets from Tokyo’s Kevin Buckland, New York’s Lewis Krauskopf, London’s Dhara Ranasinghe, Naomi Rovnick and Karin Strohecker.
1/JOBS IN FOCUS
Will US jobs data, released on June 2, show the world’s largest economy is strong enough to avoid a recession but not so hot that it would force another tightening move from the Federal Reserve?
Non-farm payrolls are expected to post job growth of 180,000 in May, according to a Reuters poll. In April, US job growth accelerated to 253k, with wage increases accelerating significantly.
The jobs report will be one of the last data ahead of the Fed’s June meeting, when the central bank is expected to pause its aggressive 14-month rate hike cycle to curb inflation.
Meanwhile, time is ticking down for the US government to hit its $31.4 trillion debt ceiling, and the federal government may run out of cash to pay all of its bills as soon as June 1st.
Economists polled by Reuters expect the US economy added 180,000 jobs in May, a potentially strong reading that will come just a week before the Federal Reserve decides on its policy.
2/ECB 1, MARKETS 0
At its meeting three weeks ago, the ECB reiterated that it was fully in rate-hike mode to curb inflation. Unconvinced, markets reduced their bets on further gains and focused on slowing growth. Germany has just entered the recession.
But for now, traders need to reconsider their perspective. May inflation flash figures in the euro zone on Thursday and a slew of national data in the coming days are likely to fuel the debate over peak interest rates. Business activity in the Eurozone remains robust, core inflation is stable above 5% and wage pressures are mounting.
HSBC expects the ECB’s interest rate to rise to 4% from the current 3.25%. Meanwhile, data on Wednesday showed that UK inflation fell less than in April, sending UK government bond yields higher. Traders know that, like central bankers and economists, they don’t always get it right.
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3/China’s lottery hopes
Now it’s China’s turn for its PMI testimony – and there’s little reason to expect a turnaround in the struggling economy. From inflation figures to retail sales, the latest data has undoubtedly painted a bleak picture of lackluster domestic demand.
It seems the only thing Chinese consumers want are lottery tickets, with sales soaring to a decade-high and betting their fortunes on luck rather than policymakers.
However, there is optimism in the interbank repo market, where record activity is a sure sign that traders are expecting central bank stimulus soon.
Of course, shattered hopes of a post-COVID boom aren’t the only reason for caution: The tech export dispute with the US continues to grow, while the Asian giant’s rapprochement with Russia is causing great uneasiness in the West.
China’s economy
4/VERGONOMICS JUDGMENT
On Sunday, Turkey will choose its next president in a hard-fought race pitting President Tayyip Erdogan, who wants to extend his two-decade rule, against opposition candidate Kemal Kilicdaroglu.
Erdogan is expected to come out on top after a strong first round, and his party’s coalition has already won a majority in parliament. But there is disagreement and uncertainty within his administration over whether to stick with what some are calling an unsustainable economic program or abandon it, insiders say.
But whoever rides to victory faces the difficult task of steering an economy characterized by high inflation and a falling lira into more stable waters after years of unorthodox monetary policy.
Reuters graphics
5/YOU HAVE ANGRY
Artificial intelligence has a moment. Shares in AI chipmaker Nvidia surged around 25% in a single day after the company issued upbeat sales forecasts.
Technology took center stage when Microsoft-backed Open AI launched its essay-writing bot ChatGPT last November. Industry insiders are predicting huge advances in the proficiency of this so-called generative AI, while regulators and politicians fear AI is stealing jobs or spreading misinformation.
For investors, it raises very different questions: Will AI cause long-term deflation? Will it create new jobs and new industries? And how can you make money with it?
AI-related stocks are booming, but all of the technology’s impacts are far from certain. Do you remember the dot-com bubble?
Reuters graphics
Compiled by Karin Strohecker; Edited by Toby Chopra
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