Must read: stock market sell-off, UK jobs data, China GDP, oil

GLOBAL MARKETS

Risk-off sentiment is gripping European markets today - the DAX, CAC and FTSE 100 have shed more than 1% each as negative momentum from yesterday’s sell-off on Wall Street carries forward to this morning’s price action.

The strength of the US dollar is proving problematic for risk appetite as hopes fade of a near-term rate cut stateside. San Francisco Fed President Mary Daly said there’s ‘no urgency’ to cut US interest rates. There are also worries about rising geopolitical tensions in the Middle East with concerns about how Israel plans to respond to Iran's attack over the weekend. 

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In the UK, almost all stocks are in the red today on the FTSE 100, caught up in today’s sell-off. B&M European Value Retail SA (LSE:BME) has plunged to the bottom of the blue chip index, giving back yesterday’s gains, despite forecasting full year profit at the top end of guidance. 

In the US, shares in The Goldman Sachs Group Inc (NYSE:GS) rose sharply after first quarter earnings topped estimates, reaching their highest level since 2021. Focus now shift to updates from Bank of America and Morgan Stanley later today. 

Tesla Inc (NASDAQ:TSLA) shares plunged more than 5.5% on Monday, landing the stock down 35% year-to-date. The electric vehicle company announced plans to lay off more than 10% of its global workforce in a bid to cut costs. Tesla has been grappling with a perfect storm of disappointing sales, stiff competition, particularly from China, and higher interest rates.

UK UNEMPLOYMENT 

The UK unemployment rate rose to 4.2% between December and February, up from 3.9% in the previous period and worse than analysts’ had pencilled in for 4%. 

Signs of economic weakness are showing up in the jobs market with the UK unemployment rate rising to a six-month high, logging the biggest jump since 2020 at the height of the pandemic. Businesses continue to express caution in terms of their hiring plans – vacancies between January and March fell to 916,000 down by 204,000 versus a year ago. Partly because of an increase in people who are long-term sick amid pressures on the NHS, 22.2% or more than one in five working age people between 16 and 64 are now economically inactive. 

The Bank of England will no doubt be paying close attention to today’s wage growth figure, which remains very strong at 6% (excluding bonuses) in December to February, down modestly from 6.1%. Although this is a good thing for workers, for the central bank, there continues to be a risk of second-round inflationary effects whereby stubbornly higher earnings leading to increased price pressures. 

In another sign of weakness in the labour market, recruitment firms Robert Walters (LSE:RWA) and Hays (LSE:HAS) both reported disappointing quarterly updates today on the back of slow hiring conditions. Both stocks are trading sharply lower today.

CHINA DATA 

China’s economy grew by 5.3% in the first quarter year-on-year, beating analysts’ expectations for growth of 5% and up from 5.2% in the previous period. This was the strongest GDP figure for the world’s second largest economy in three quarters thanks to stepped up efforts by Beijing to support the Chinese economy and strong consumer spending over the Lunar New Year holiday. 

Today’s data puts China on track to secure its ambitious growth target for 2024 of around 5%, something many other economies would only dream of. However, growth is still below its long-term average of around 7%. And other data out today paints a less optimistic picture - industrial output in March grew by 4.5%, missing forecasts for 6%, down from 7% in January-February and retail sales rose by 3.1% also below estimates for 4.6%. 

China certainly isn’t out of the woods just yet – it has been battling against a cocktail of headwinds including its ongoing property crisis, weak consumer confidence and tumbling exports in March. In another worrying sign, last week Fitch cut its outlook on China’s sovereign credit rating.

OIL 

Oil is rebounding today, thanks to stronger-than-expected GDP data from the world’s biggest oil importer China, as well as concerns about how Israel will respond to Iran’s retaliatory attack over the weekend. 

Brent crude is up around 19% so far this year having scaled six-month highs last week. Money managers have been increasing their long positions on US crude futures and options lately. And there are growing concerns that oil could continue upwards to $100 a barrel which would put upward pressure on inflation, potentially further pushing out the timing of the first rate cuts from central banks like the Fed and the Bank of England.