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Markets were a little fearful going into last Friday’s NFP report, particularly given the dismal ADP employment data from earlier in the week, but in the end such fears were unfounded. The headline figure came in slightly above expectations at 139k new jobs, while the unemployment rate remained steady at 4.2%. As usual with non-farm payrolls, these numbers are susceptible to heavy revision over the next few publications, but doomsaying will fall on deaf ears for the time being – at least until the latest CPI numbers on Wednesday. US stocks were predictably upbeat following the positive NFP report. All three major indices closed the day around 1% higher and the S&P 500 climbed back above 6,000 points for the first time since February, placing it around 2% down from its all-time high. The Dollar remained relatively stable, gaining half a percent over the usual basket and pushing the DXY back above 99. Gold on the other hand reacted somewhat poorly to the data, falling 1.3% to a $3,310 weekly close. More interesting is the price action in silver, which is currently pushing above $36 an ounce for the first time since 2012. Although gold has captured the lion’s share of headlines so far this year, both precious metals are up roughly 25% in 2025. The odds of a rate cut are now nil. Interest rate traders are pricing in a rate hold during next week’s meeting with 100% certainty. President Trump, who has been characteristically vocal in criticising Jerome Powell, will soon put forward names for the Fed Chairman’s replacement, although the incumbent is under no obligation to relinquish his position until May 2026. Kevin Warsh, a former Fed governor, is seen as the frontrunner to take over the role. US-China trade talks are expected to re-emerge this week, with negotiations scheduled for later today in London. The economic calendar is looking relatively sparse again over the next few days, with very little to offer until the latest US CPI report on Wednesday, followed by PPI on Thursday. Headline consumer inflation is expected to tick up slightly to 2.5% annually, while headline PPI is expected to rise to 0.2% in May. There is a small splattering of earnings reports this week, including Gamestop (GME) and Oracle (ORCL), but Tesla (TSLA) will probably also remain relevant due to the spat between Musk and Trump, which seems to have mostly blown over already.
Services PMIs rolled in from around the world over the past couple of days, giving markets more economic data to chew on. The main Eurozone figure fell in line with predictions at 48.9, meaning the services and manufacturing sectors are now both in contraction for the common currency area. The figure for Germany was particularly grim, falling to its lowest level since 2022 with a 47.1 print. In China, the index fell dead on predictions at 51.1, a slight improvement on the previous month. Over in the US meanwhile, the services PMI came in at 53.7, beating expectations and marking a sharp rebound from the April figure. Sadly, the good news did not extend to the US labour market. The ADP employment change missed consensus by a country mile on Wednesday, falling to just 37k new jobs versus expectations of 115k. Not exactly a thrilling report, but by and large markets are more interested in the NFP numbers set for publication later today. While the two reports often provide conflicting information, the ADP numbers do not bode well. Should the NFP report prove to be anywhere near as bad, there will be significant ripples throughout markets later today. Of course, poor employment figures are one of the necessary stepping stone towards lower interest rates. The US labour market has been remarkably resilient up until this point but a strong shift could force the Fed’s hand. Current predictions are set at 130k new jobs and unemployment holding steady at 4.2%. In other news, Tesla stock (TSLA) reacted miserably to the unfolding spat between founder Elon Musk and president Trump yesterday. Musk has been extremely vocal in his criticism of Trump’s spending bill, complaining that it completely erases all the savings painstakingly achieved by the DOGE initiative. Things escalated on Thursday when Trump argued that the easiest way to save money would be to terminate the government subsidies and contracts enjoyed by the electric car manufacturer. The back-and-forth pushed Tesla (TSLA) stock down 14% by yesterday’s close, dragging the S&P 500 and Nasdaq indices down along with it. Fun times.
Not much to talk about so far this week other than raw economic data. Manufacturing PMIs from around the world poured in over the last couple of days and the results fell largely in line with expectations. In Europe, the figure for the Eurozone manufacturing sector rose slightly to 49.4 from 49 the month prior. A slight improvement but the sector remains in contraction for the common currency area. Spain meanwhile surprised markets by jumping into expansion with a figure of 50.5 in May. The worrying statistic however is that Germany’s manufacturing sector has now been in contraction for the past 35 months in a row. On the other side of the Atlantic, S&P Global published a figure of 52.0 for the US manufacturing sector, while the less expansive ISM figure came in substantially lower at 48.5. Manufacturing figures from China revealed a sharp drop in May, with the PMI falling down to 48.3 from 50.4 in April. Manufacturing data give way to services PMIs for the remainder of the week, starting once again with Europe before moving on to the US and then China early on Thursday morning. Moving onto the labour market, the Job Openings and Labour Turnover Survey (JOLTS) showed an unexpected rise in US job openings yesterday. Predictions converged on 7.1 million new job openings in April, but the actual figure came in quite a lot higher at 7.39 million. Later today, the latest ADP employment change will report the May jobs figures, but the real meat of the sandwich is of course the NFP drop on Friday. Traders will have to wait a while longer for some degree of volatility.
The saying “sell in May and walk away” has not played out so far this year. US stock markets enjoyed historic gains last month, with all three major indices undergoing strong rallies following the short-lived downturn the month prior. The Dow closed the month 4% higher, while the S&P 500 experienced its best May since 1990 with a 6.1% gain. The Nasdaq Composite meanwhile added the better part of 10% to its tally. In Europe, the German DAX pushed to new record highs, gaining 6.7% over the course of the month. The FTSE 100 climbed 3.3% over the same time frame. In Asia, the Nikkei 225 and Hang Seng Index matched each other with a 5.3% rise. With all that said, summer is just around the corner and historically the warmer months have not been kind to stocks. For all the volatility in metals, gold closed the month completely flat at $3,289 an ounce. A similar story for the Dollar, which lost a measly 0.2% against the usual basket of currencies. On the other hand, cryptocurrencies had a stellar month, with Bitcoin gaining 11%, reclaiming six figures and establishing a new record high of $112k. A number of market participants are coming round to the idea that aggressive tariffs are being used as a negotiation tool rather than anything more sinister. Early reactions certainly erred on the side of drama but by and large markets are beginning to wise up. In the US, more good news emerged on the inflation front last Friday with the release of the most recent PCE price index. The year-over-year figure fell to 2.1% in April while prices excluding food and energy rose by 2.5% – the lowest increase in four years. The economic data will continue to pour in over the next week, starting with manufacturing PMI numbers from across the world later today, followed by services PMIs later in the week. Tuesday offers the first glimpse into the US labour market with the latest JOLT survey, swiftly followed by the ADP employment change on Wednesday. Later on the same day, the Bank of Canada is expected to hold rates steady on the Canadian Dollar at 2.75%, while on Thursday the European Central Bank is looking to lower rates on the Euro by another 25-bps to 2.15%. Capping off the week, non-farm payrolls will hit the newswires on Friday. Current predictions are looking at 130k new jobs and unemployment remaining stable at 4.2%.
The good news concerning US-EU trade talks caught up to US stocks yesterday following Monday’s market closure. The EU agreeing to fast-track trade negotiations was a welcome development for all involved and markets on both sides of the Atlantic reacted accordingly. All three major US indices enjoyed strong rallies; the Dow rising 1.8%, the S&P 500 gaining 2% and the Nasdaq closing the day 2.5% higher. European stocks also partook in the celebrations, with the German DAX in particular hitting a record high yesterday. It is fair to say that markets in general have settled down over the past two days. Cash flows have pivoted back towards the Dollar while gold has been dragged back below $3,300 early this morning. Crypto remains muted. Markets are patiently awaiting a couple of events later today. The first is the publication of the latest FOMC minutes, the second is the release of Nvidia’s first quarter fiscal results. The only question people will want an answer to with regards to the Fed is whether or not some board members are beginning to change their tune about the threat of inflation. There have been minor murmurings of dissent recently, as some members argue the impact of new duties will be limited and short-lasting. With that said, few are expecting a rate cut at the next meeting in June or indeed the one after. As for Nvidia, the chipmaker is certainly one of the heavy hitters on the earnings calendar and the latest results will no doubt trigger a few ripples, although the report will only hit the newswires after the closing bell. The company has been on the receiving end of both import tariffs and export bans as a result of the ongoing trade antics. One point of interest is the impact of the recent export restrictions to the Chinese market, which currently accounts for 14% of Nvidia’s revenue.
Tensions between America and Europe peaked at the end of last week, culminating in president Trump imposing a straight 50% tariff on all EU goods. By all accounts, negotiations between the two blocs had proceeded poorly up until that point, with Trump accusing the EU of being “very difficult to deal with” and that the discussions “were going nowhere”. European and US indices reacted badly to the announcement, dropping sharply last Friday while the Dollar continued to lose out against the majors. The move also prompted fresh inflows into gold, ever the safe haven in troubled times, raising the precious metal to $3,358 an ounce. It did not take long to bring the EU back into the fold. By Sunday night, the Trump administration had agreed to postpone the deadline to the 9th of July, giving more time for a deal to be reached. US futures have shot up following the announced delay. The selloff in the Dollar continued this morning, lifting the Euro up to $1.14 while the Pound Sterling pushed towards $1.36 – a three year high. The shift to risk-off conditions late last week cut short the momentum in crypto, causing a minor fall for Bitcoin from highs of $112k down to $108k over the weekend. Some measure of bullishness has returned to cryptocurrencies this morning but it is too early to say whether or not we will be seeing new highs again this week. The economic calendar is particularly dry this week – it is the end of the month after all. Markets have the FOMC minutes to look forward to on Wednesday, although given how consistent the Fed has been in recent months, the latest meeting will likely provide nothing of substance. The big event of the week will be the PCE price index, set to be released on Friday. So far inflation in the US has not been the catastrophic blight that economists have been warning about, in fact figures have consistently fallen below expectations. The latest publication will reveal whether or not the trend continues.
