Mixed numbers from US job market
US job growth steadied at +151k (below estimates of 160k) non-farm payrolls added in February with unemployment rate rising to 4.1% (from 4.0%)
- Some indications that labor market is weakening are present with more people permanently out of work, fewer workers on government payrolls and an increase in part-time workers
- March job report will probably look worse as data for February includes the period before most of the Trump administration’s government firings
- Expected tariff hikes and spending cuts may continue to push unemployment higher during the next few months
- This afternoon with US inflation numbers for February will be released – markets are expecting a 3.2% increase year-on-year in Core CPI
US exceptionalism under threat
Growing concerns over a possible recession have driven investors away from risk assets in the US
- Technology companies, once key drivers of the previous bull market, have been hit the hardest
- The retreat from risk is even more severe in speculative areas, as investors shift from low-quality stocks to safer, high-quality asset
Eurozone investor sentiment surges
The Sentix investor sentiment index in the Eurozone jumped to -2.9 in March from -12.7 in February, exceeding the consensus forecast of -9.1
- Investor sentiment improved significantly at the end of Q1, driven by announcements of increased defense and infrastructure spending in Germany and the EU, which outweighed concerns over Donald Trump’s tariff hikes on Canadian and Mexican imports and his threats of higher tariffs on EU goods
- The headline increase was supported by gains in both the current assessment index, which rose to -21.8 from -25.5 in February, and the expectations gauge, which surged to 18.0 from 1.0, its highest since July 2021
- As a result, a rebound in GDP growth is now anticipated in both the Eurozone and Germany
ECB: A new cut, will a pause follow?
As widely expected the European Central Bank cut rates by 25bp to 2.50% during last Thursday’s meeting – marking the sixth intervention since June 2024
- Disinflation progress remains on track with inflation now expected to reach its 2% target in early 2026 (and not later this year as previously envisaged)
- Updated quarterly projections confirmed ECB’s outlook for prices while lowering it for growth in both 2025 and 2026 – projections exclude potential implications of new defense outlays by European governments
- President Lagarde left April decision wide open as the Governing Council tries to assess developments in geopolitics and domestic fiscal spending as well as incoming data – markets are currently pricing a 50% chance of a new cut
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