Global stocks rebounded Friday as investors both gauged reaction to the escalating trade war that followed President Donald Trump's decision impose steep tariffs on steel and aluminium imports and prepped for a key reading on job creation later today from the world's biggest economy.
Reaction from some of America's key trade allies has some investors concerned that a tit-for-tat trade war could slow global growth while igniting fresh inflation concerns was, however, partially offset by cooling political tensions in Italy, where a new coalition government is expected to be sworn in in Rome Friday after leaders from the Five Star and Lega parties nominated a more mainstream candidate for the post of finance minister.
Elon Musk Responds to Boeing's Claims It Will Fly to Mars FirstThe news helped take European stocks firmly higher at the start of trading, with the DAX performance index in Germany rising 0.87% and Britain's FTSE 100 rising 0.67% in the opening 90 minutes of trading. Italy's FTSE MIB benchmark surged 2.7%, on news of the new government, with bank stocks leading the advance as 2-year government bond yields eased to 0.68% and 10-year yields retreated to 2.64%.
Spain's IBEX index was marked 1.6% higher even as Socialist party leader Pedro Sanchez assumed the role of Prime Minister after ousting center-right pro-European leader Mariano Rajoy in a no confidence vote following a corruption scandal.
However, with only 84 seats in the 350-seat chamber, Sanchez will need the support of, among others, the Basque Nationalist Party in order to maintain its leadership until the end of the current parliamentary term in 2020.
Deutsche Bank (DB) shares rallied from an all-time low in early Friday trading as new CEO Christian Sewing attempted to draw a line under the lender's escalating challenges that could put its mutli-billion dollar restructuring under threat and won the support of a key shareholder.
Deutsche Bank shares were marked 3.2% higher by mid-day in Frankfurt and changing hands at ?,?9.45 following yesterday's 7% decline that pushed the stock to an all-time low of ?,?9.16 each. Friday's move puts the stock's year-to-date decline just under 40% compared to the 10.6% decline for the Stoxx Europe 600 Banks index.
Global market sentiment, however, remains broadly cautious given both the Trump Administration's somewhat bellicose approach to world trade and the swift response from allies in Europe and North America, all of which imposed or prepped retaliatory tariffs following the dropping of exemptions on import levies yesterday.
Americans remain our partners, friends, and allies. This is not about the American people. We have to believe that at some point their common sense will prevail. But we see no sign of that in this action today by the US administration.
- Justin Trudeau (@JustinTrudeau)May 31, 2018U.S. stocks, which fell heavily yesterday in the wake of the announcement from Commerce Secretary Wilbur Ross, look set for a modest opening bell rebound, according to early futures prices, with the Dow Jones Industrial Average set to gain around 134 points at the start of the trading day while the broader S&P 500 is priced for a 13 point advance.
As is often the case on a payroll Friday, however, much will depend on the Bureau of Labor Statistic's reading of the employment situation last month, with investors expecting employers added between 180,000 and 190,000 jobs in May, a figure which will hold the headline unemployment rate at 3.9%.
Average hourly earnings growth is expected to hold steady at 2.6%, according to forecasts, and any deviation in either direction is likely to have a sharp impact on U.S. Treasury markets, which rallied hard this week in the wake of Italy's political crisis and slower-than-expected data from the housing market, both of which has altered views on the Federal Reserve's ability to raise interest rates three more times this year.
In fact, according to the CME Group's FedWatch tool, investors are pricing in only a 27.6% chance of a December rate hike at present, that's down from 30% last week and 40% at the beginning of May.
It's Not Cool Anymore for Companies to IPO: Former Cisco CEO John ChambersThe subdued outlook has taken benchmark 10-year yields to a multi-week low of 2.86% this morning even as the dollar index, which tracks the greenback against a basket of six global currencies, holds at a near six-month high of 94.14 in early European trading.
Global oil prices were modestly higher in early dealing, although investors remain puzzled by the widening difference between Brent and WTI crude prices, which surged past $10 a barrel this morning amid conflicting signals on supply and demand in global energy markets owing to both the threat of renewed sanctions on Iran and slowing output from crisis-hit Venezuela.
WTI/Brent spread breaks US$10/bbl.... Production growth in the Permian continues to weigh on WTI, and production is set to only continue growing... for now. pic.twitter.com/V78jGx7RDT
- Warren Patterson (@warrenpatCMDTY)May 31, 2018Brent crude futures for July delivery were marked 34 cents higher at $77.90 per barrel during London hours while WTI contracts for the same month bumped 24 cents higher to change hands at $67.28 per barrel.