Saturday, March 2, 2024

Today’s markets: Shares rally ahead of US jobs data

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European stocks rallied Friday after a positive session on Wall Street. The FTSE 100 is up 0.5 per cent while in Frankfurt shares are up nearly 0.8 per cent, with Paris falling in between. Overnight, the the Dow Jones erased Wednesday’s losses, climbing around 1 per cent to a fresh record while the S&P 500 rallied 1.25 per cent. Asia was broadly firmer, though China struggled. The dollar pulled back sharply after an initial surge post-Federal reserve. Oil skidded lower yesterday but found some support at its 50-day moving average, which we’d cut up through a couple of weeks ago. Gold was largely holding gains but a little off yesterday’s month high around $2.065.

The Bank of England held rates and caught up with peers in terms of positioning for cuts rather than more hikes. It will be slow to move with services inflation still too high.

Megacap tech earnings were good in the main. Meta surged 15 per cent after-hours after the company announced its first dividend. Amazon also beat expectations and rose 7 per cent after-hours. Apple beat but disappointed on worries about a slowdown in iPhone sales in China. More on all those here.

It’s non-farm payrolls (NFP) today: cue the Challenger jobs: the second highest January layoff announcements since 2009 and January hiring plans lowest on record. Meanwhile, initial claims also topped estimates, rising to 224,000 vs. 212,000 fc (prior 214,000). Continuing claims also rose in the week to 20 Jan: 1.898mn vs. 1.839mn forecast (prior 1.833mn).

But here is something: productivity is up 3.2 per cent vs 2.5 per cent estimated. Here’s Challenger to explain that: “Layoffs are also driven by broader economic trends and a strategic shift towards increased automation and AI adoption in various sectors, though in most cases, companies point to cost-cutting as the main driver for layoffs.”

So, AI is a factor already – and this has important implications for how the Fed and other central banks look at things like the labour market and what impact rate cuts will have on the Philips Curve. It’s all happening right now under our noses. 

Andrew Bailey, the BoE chief, yesterday said AI would not be a “mass destroyer of jobs”. I wonder what his qualifications are on that front? I would assume that based on history it won’t destroy jobs as much as change the type of work that we do – but in the same vein, learning from history, it will widen inequality in the labour market, concentrating resources in an ever-decreasing circle of high-skilled workers. So I guess you need to own some stocks.

Anyway, we have the NFP jobs report today to consider. Expected at 187,000 from 216,000 last time, with unemployment forecast to tick up to 3.8 per cent.

The Trader is written by Neil Wilson, chief market analyst at Finalto

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