US non-farm payrolls to set the tone ahead of the weekend?
The market is keeping a watchful eye ahead of the US jobs report later
There is a lot of focus on the US non-farm payrolls later today, as market participants are in search of more clues on how the rise in coronavirus cases across the US is impacting the labour market. At this point, it feels like just about any suggestion will do.
Equities have largely held firmer throughout the week before encountering some jittery signs today, but that can still all change before the weekend.
As to why there is so much interest in the jobs report later, there are a few considerations.
Firstly, we have started to move off the fiscal cliff in the US as unemployment benefits have lapsed for over a week now. Adding to that, Congress is failing once again to reach a compromise for additional stimulus and that looks set to drag into next week.
That is arguably the key factor that is perhaps feeding some concerns to the market.
Then, there is also the fact that the virus situation continues to look bleaker in most countries after having seen the health crisis somewhat addressed since May to June.
Japan, Australia, and Hong Kong are among those which are making major headlines but the situation in the likes of India, Philippines, and Indonesia are arguably worse.
Adding to that is the recent rise in cases in Europe, with Germany posting a second straight day of new cases above the 1,000 mark - first time since early May.
And this is all before mentioning the situation in the US, which feels like the market has become desensitised by all the figures and updates over the past two months.
Even if the market becomes desensitised to all of this, virus fears are very real and they will play a role in limiting the global economic recovery and dampen consumption/spending - not forgetting that international borders are still closed at the moment.
That is all playing in the back of investors' minds surely but in the context of the near-term, all eyes will be glued on the US jobs report first and foremost today.
Seasonal adjustments may play a role and one would think that all of that should already be factored into the report later, but it's pretty much a guessing game for what the narrative will turn out to be once the numbers are released.
A good jobs report later - even if it may be due to muddy data - could be enough for the optimists to keep the calm ahead of the weekend. But I fear a relatively poor one has the potential to hurt risk sentiment a lot more than the market may be expecting.
I mean, US lawmakers are unlikely to get things settled today and continues to stay as a headwind and if there are signs that labour market conditions are declining further amid the rise in virus cases, there's little else but cheap money to boost hopes today.
US-China tensions are also mounting and that's another headwind for risk assets for now.
Then again, we've seen time and time again the power of cheap money. So, there's that.