Markets Focus On US NFP Report, Weak Chinese PMI Data

May 31, 2023 12:16

The US Nonfarm Payrolls May report, due to be released by the Bureau of Labour Statistics (BLS) on Friday, is going to be one of the most important data reports for the rest of this week. As the NFP survey is taken into consideration by the Fed’s governing board, economists will be waiting to see if the final figure will be in line with the forecast.

According to a report by the National Institute of Statistics and Economic Studies (INSEE), headline inflation in France fell to 6% in May on a yearly basis. The French Finance Minister Bruno Le Maire noted that “inflation is going down and is actually going down quite strongly,” adding that the country’s economy is forecast to grow by 1.0% in 2023.

On Thursday, Eurostat will publish preliminary data regarding the euro bloc’s headline and core inflation.

US Nonfarm Payrolls May 2023 report

The US Nonfarm Payrolls May report is expected to draw the attention of investors and traders on Friday. Market analysts suggest that 180,000 jobs were added to the US economy in the last month of spring. It should be noted that the April jobs report showed 253,000 jobs added to the economy, surpassing expectations for a 179k figure by far.

Overall, the rate of payroll additions has continued to ease in the last few months, accompanied by a drop in wage growth. Another report is expected to reveal a small uptick in unemployment with the rate coming in at 3.5% in May.

Economists at MUFG Bank suggest that a strong jobs report on Friday could lend support to the US dollar. In their report, they mention that “assuming that US politicians don’t surprisingly reject the deal, market attention should switch back to the health of the US labour market in the week ahead including the release of the NFP report on Friday. The US rate market has been moving to price in a higher probability of another 25 bps hike from the Fed at next month’s FOMC meeting, which is now judged as more likely than not. Another strong employment report this week would further reinforce those expectations and encourage a stronger USD in the near-term.”

Eurozone preliminary CPI data

On Thursday, Eurostat will release preliminary data regarding the eurozone’s harmonised consumer price index in May. Some market experts suggest that headline inflation could drop to 6.3% on an annualised basis. If confirmed the figure would be 0.7% lower than April’s. Core consumer prices are also expected to tick lower to 5.5%.

Analysts at Moody’s said in their report that “there should also be a slight negative effect from the food segment as cost pressures gradually ease, however, we expect annual core inflation to be unchanged at 5.6% as an increase in services inflation balances out a decline in core goods inflation.”

Chinese PMIs in May

The National Bureau of Statistics (NBS) published its May Manufacturing PMI report which showed that the PMI fell to a five-month low of 48.8, indicating that factory activity shrank faster than anticipated. The non-Manufacturing PMI dropped to 54.5 from 56.4.

Citi economists wrote in a report: “Insufficient demand could be the major concern now, and there are both cyclical and structural causes for it. The initial boost to the services sector from reopening could be fading.”

HSBC analysts told CNBC reporters that the combination of weak labour and goods demand may force the Chinese central bank into action.

They noted that “the way that we see things is that China will have to deploy a little bit more fiscal stimulus, a little bit more targeted easing as well. At the end of the day, unemployment, especially in the youth parts of the population, is too elevated, and they will have to bring that down in order to achieve their growth targets going forward.”

Australian monthly inflation rises in April

A set of data published by the Australian Bureau of Statistics (ABS) revealed that monthly headline inflation in Australia rose more than anticipated in April, coming in at 6.8% on a yearly basis. The report showed that the most significant price rises were recorded in housing, food and beverages and transport.

Some market analysts noted that, while the quarterly CPI inflation report draws more attention when reviewing the Australian economic conditions, the rise in consumer prices isn’t good news for the Reserve Bank of Australia.

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This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.

Miltos Skemperis
Miltos Skemperis Financial Content Writer

Miltos Skemperis’ background is in journalism and business management. He has worked as a reporter on various TV news channels and newspapers. Miltos has been working as a financial content writer for the last seven years.