Market movers today - In the US, the jobs report for June is due out. Overall, the labour market has started to show some weakness, so we think it is important to keep an eye on employment growth, which is an important recession indicator, in our view. The average monthly increase in nonfarm payrolls has declined to 164,000 this year, from 223,000 in 2018. We expect employment growth to come in around 175,000. We estimate average hourly earnings rose +0.20% m/m in June, unchanged at 3.1% y/y.
- The tense situation between Iran and the west may escalate further after the UK seized an Iranian tanker carrying oil to Syria in violation of the European and US sanctions. Furthermore, Iran has set a deadline of Sunday for European countries to provide economic assurances to the country and hence chose their sides against the US. If not, Iran will restart enrichment of Uranium, increasing the risk of an adverse US action.
- Greece is holding general elections on Sunday, with the Conservative party widely expected to win back power from the Leftish party Syriza. The Conservative party has promised a series of tax cuts to help stimulate the Greek economy that is still curtailed by the long adjustment process after the debt crisis.
Selected market news
Following yesterday's Fourth of July market closures in the US, Asian markets are mixed this morning. These markets are clearly in wait-and-see mode ahead of the US jobs report. With the crucial Fed meeting coming up in late July, a jobs report on either the strong or weak side could shift expectations of Fed policy actions. The possible action by the Fed and other major central banks has been a more important driver for equity markets lately than the salient trade ceasefire between the US and China over the weekend at the G20 meeting. European equities were slightly higher yesterday. The most noteworthy development in European markets was yields on 10-year German Bunds falling below the European Central Bank's deposit rate for the first time. The search-for-yield has given way for a significant rally in periphery markets, with Italy and Greece seeing significant compression of their spreads versus core markets.
Oil is generally trading on the weak side, setting up for the biggest weekly decline since May. Weak global demand concerns seem to be outweighing the recent proposal from the OPEC+ pact to extend supply curbs into 2020 and worries that a renewed US confrontation with Iran may threaten supplies. We continue to believe that oil prices will rebound over the course of this year following the OPEC+ deal, supply concerns in Iran, Libya and Venezuela and a modest recovery in the global economy towards the end of the year.
In Brazil, local market sentiment strengthened significantly after the government managed to get its crucial pension reform proposal through a key congressional committee on Thursday. This fuelled investor optimism that the bill can be approved by the lower house before its mid-year recess later this month. The pension reform is very important in ensuring public debt sustainability in the world's eighth largest economy.
Scandi markets
In Norway, strong growth in oil-related industries has meant manufacturing activity has held up well despite the slowdown in global manufacturing. Manufacturing production has been considerably weaker than soft data but increased by 2.2% in April. Given the strong rise in April, we estimate a slight correction for May, with a decrease of 0.4% m/m, while consensus expects -0.8 %.
In Sweden, we see a risk of a correction in manufacturing production on the back of weak German production.
Key figures and events
