Investors Already Looking Toward Friday’s Job Report
2022.07.05 20:41
Several employment indicators leading up to Friday’s June job report will likely serve as tea leaves for analysts trying to guess those key numbers at the end of the week. With an increasing number of firms seeing a higher likelihood of a recession, June’s jobs report will be an important one as analysts and investors look for chinks in the armor of a strong labor market.
In fact, it’s likely that the yield curve will invert once again this week. The 10-2 year treasury yield spread is near zero, which is a popular indicator of recession.
The 10-year treasury yield continued to slide this morning in premarket action, falling more than seven basis points to 2.81% as investors still appear to be looking for safe-havens. The CBOE Volatility Index confirms that nervousness as it shot up more than 5% ahead of the opening bell to reading just shy of 29.
The US dollar index also broke higher once again this morning as international investors leaned toward the safety of U.S. Treasuries as well. The higher dollar is likely to be a drag on multinational stocks as currency headwinds are getting stronger again. The dollar index appears to be building toward another 52-week high and is trading at 2002 levels. In fact, the dollar and the euro could trade at parity soon, which hasn’t happened since 2003.
However, in today’s economic headlines, Asia is drawing attention. Japan’s service PMI reached a nearly 9-year high, good news for the country that has struggled with decades of economic doldrums. The Nikkei was up more than 1%.
China may be getting some tariff relief from the United States. President Biden is considering ending some Trump-era restrictions that would give the U.S. some inflation relief by opening fresh supplies from China. However, simply repealing tariffs could just make Chinese goods cheaper, which could lead to higher demand, and with China still locking down its people due to its zero-COVID policy, its plants may not be able to meet demand. Additionally, removing tariffs runs a potential risk of the White House looking weak on China in a midterm election year where Democrats may lose the majority in both the House and the Senate.
The Shanghai Composite was down 0.04% as Beijing performed another round of mass COVID testing. Testing could lead to additional lockdowns or other pandemic measures that could pressure the technology-heavy NASDAQ Composite. The Hong Kong Hang Seng rose 0.10% despite typhoon disruptions.
