05 Apr

The RBNZ unexpectedly raised its rate by 0.5%. The US labor market is starting to show signs of slowing

April 5, 2023

By JustMarkets

According to the monthly JOLTS report, the number of job openings, a measure of labor demand, fell by 632,000 to 9.9 million in February, the lowest since May 2021. This is a direct sign of a slowing labor market, reinforcing investors’ bets that the Federal Reserve will end its tightening cycle and fueling recession fears. The US factory orders also declined for the second straight month, a 0.7% decrease in February after falling by 2.1% in January. The Dow Jones Index (US30) decreased by 0.59%, and the S&P 500 Index (US500) lost 0.59% at the close of the stock market on Tuesday. The NASDAQ Technology Index (US100) fell by 0.52% yesterday.

Analysts believe that if bad economic data is added to the banking crisis plus rising oil supply costs, there is a better chance of a rate cut later this year. On Tuesday, the interest rate futures market estimated a 50% chance of a 25-bp rate hike in May. Although on Monday, that probability was more than 65%.

Northcoast Research downgraded Boeing Co. (BA) from neutral amid concerns that engine maker CFM International won’t be able to supply enough engines for the aircraft maker, limiting its growth. Lockheed Martin Corporation (LMT) said Monday that the US Army has a multi-year contract to produce joint air-to-ground missiles (JAGM) and HELLFIRE missiles. The contract is worth $4.5 billion. In March, President Joe Biden requested $842 billion for the Pentagon and $44 billion for defense-related programs. The 2024 budget proposal is $28 billion more than last year.

Stock markets in Europe traded flat Tuesday. German DAX (DE30) gained 0.14%, French CAC 40 (FR40) lost 0.01%, Spanish IBEX 35 (ES35) gained 0.29%, and British FTSE 100 (UK100) closed yesterday down by 0.50%.

Huw Pill, the chief economist of the Bank of England, said that officials might have to raise interest rates even if inflation declines in order to prevent price increases caused by the attempts of households and companies to regain lost income. For her part, Bank of England policymaker Silvana Tenreyro laid out the case for lower interest rates. The politician believes that as the bank rate moves further into restrictive territory, a softer stance is needed to achieve the inflation target in the medium term. Inflation in the UK surprised economists as it stubbornly remained above 10%, five times the Bank of England’s target. Inflation is expected to fall sharply from its current level of 10.4% in the coming months due to lower energy prices and base effects.

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On Tuesday, the two-year US Treasury bond yield, which generally reflects interest rate expectations, fell 12 basis points (bps) to 3.86%. With gold and silver inversely correlated to the dollar index and government bond yields, precious metal prices skyrocket. Meanwhile, gold is on track to renew its all-time high.

Asian markets were mostly up yesterday. Japan’s Nikkei 225 (JP225) gained 0.35%, China’s FTSE China A50 (CHA50) wasn’t traded, Hong Kong’s Hang Seng (HK50) ended the day down by 0.66%, India’s NIFTY 50 (IND50) was flat, and Australia’s S&P/ASX 200 (AU200) ended the day up by 0.18%.

The RBNZ unexpectedly raised the rate by 50 basis points to 5.25%, saying that inflation is still too high. The RBNZ rate is now higher than that of the US Fed. The central bank of New Zealand was one of the first central banks in the world to take action against rising inflation after COVID-19 and has raised rates by a combined 500 basis points since mid-2021. The central bank said the country’s economic growth is expected to slow until 2023 amid weakening global demand for exports, slowing local consumption, and monetary policy, which is now entering a restricted zone. Further monetary policy will depend on new data.

S&P 500 (F) (US500) 4,100.60 −23.91 (−0.58%)

Dow Jones (US30)33,402.38 −198.77 (−0.59%)

DAX (DE40) 15,603.47 +22.55 (+0.14%)

FTSE 100 (UK100) 7,634.52 −38.48 (−0.50%)

USD Index 101.56 −0.53 (−0.52%)

Important events for today:
  • – New Zealand RBNZ Interest Rate Decision at 05:00 (GMT+3);
  • – New Zealand RBNZ Rate Statement at 05:00 (GMT+3);
  • – Australia RBA Governor Lowe Speaks at 05:30 (GMT+3);
  • – German Services (m/m) PMI at 10:55 (GMT+3);
  • – Eurozone Services (m/m) PMI at 11:00 (GMT+3);
  • – UK Services PMI (m/m) at 11:30 (GMT+3);
  • – US ADP Nonfarm Employment Change (m/m) at 15:15 (GMT+3);
  • – Canada Trade Balance (m/m) at 15:30 (GMT+3);
  • – US Trade Balance (m/m) at 15:30 (GMT+3);
  • – US ISM Services PMI (m/m) at 17:00 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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