Market snapshot: investors consider jobs report, rates and results

Investors shrugged off another blowout jobs report, sending markets higher although not enough to prevent overall losses for the week.

The US non-farm payrolls revealed that 303,000 jobs were added in March, against expectations of 200,000, with the unemployment rate ticking lower to 3.8%. on the face of it, this would normally have been received negatively on the basis that the strength of the labour market continues to push against the need for interest rate cuts from the Federal Reserve.

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Indeed, expectations for the first anticipated rate cut are now moving away from June and towards July, with an outlier consensus that on current form there may be no need for cuts at all this year.

However, markets moved higher on other readings from within the report, most notably wage growth, which rose by 0.3% for the month but fell slightly on an annualised basis to 4.1%. This led to the conclusion that wage inflation could be normalising, which has been a point of contention for the Fed, and comes ahead of the next test of investors’ mettle with the release of the consumer price index later this week, where core inflation is expected to slow to 3.7% from a previous 3.8%.

The reading will take on added significance given the backdrop of recent Fed comments which have implied inertia on rate cuts, while the first-quarter earnings season also begins towards the end of the week, with reports from the likes of Citigroup Inc (NYSE:C), JPMorgan Chase & Co (NYSE:JPM) and Wells Fargo & Co (NYSE:WFC).

The season as a whole is expected to reveal earnings growth of around 5%, roughly half of the previous quarter and a number which would represent the lowest result for almost a year. While margins are expected to have been under pressure given ongoing high interest rates and rising commodity costs, these low estimates also open the door for positive surprises should the companies deliver excess earnings.

Of equal importance will be the outlook and guidance from those companies on the ground, which should provide some clarity on the immediate direction of costs generally as well as consumer spending appetite.

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In the meantime, the main indices remain comfortably ahead in the year to date, with the benchmark S&P500 having added 9.1%, the technology focussed Nasdaq 8.2% and the more traditional Dow Jones index 3.2%.

Asian markets showed some reaction to the news from Wall Street, with the likes of Japan and China managing marginal progress. A decline in the oil price following some easing of tensions in the Middle East removed some inflationary pressure, although the price remains up by 16% so far this year.

The Japanese currency continued to attract speculation around central bank intervention to shore up the yen, particularly given the strength of the dollar following the jobs report which could push back the likelihood of an imminent rate cut.

UK markets were slow to react to developments elsewhere overnight, with the main index drifting very slightly lower. The recent strength of the gold price has inevitably followed through to some gains in the mining sector, with the likes of Fresnillo (LSE:FRES) and Rio Tinto Registered Shares (LSE:RIO) showing some early strength, while a cooling of the oil price alongside easing Middle East apprehension lifted easyJet (LSE:EZJ) shares, which had come under some pressure last week.

A weekend press report suggesting that Ladbrokes owner Entain (LSE:ENT) could be looking to shake up its overall strategy pushed the shares higher by more than 5% in opening exchanges.

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The slight overall decline puts further light between the current level and the record high which the FTSE 100 had been threatening, although the premier index remains up by 2.2% so far this year.

Ahead of a week which culminates in the release of GDP data on Friday, the FTSE 250 was broadly flat, bringing its year to date performance to a marginally positive rise of 0.2%, with hopes for interest rate cuts continuing to dominate investor sentiment.