US job data and an ECB rate decision are in sight

Hang Seng

Hang Seng outperformed the APAC region after strong China manufacturing PMI data. Caixin manufacturing PMI, which surveys smaller and export-oriented firms, rose to 51.7 in May, its fastest pace in about two years and beating analysts' forecasts of 51.5. In India, the Nifty 50 hit a record high as India's exit polls signaled a third term for Prime Minister Narendra Modi's government with a wider majority.

US ISM manufacturing PMI

US ISM manufacturing Purchasing managers' indexes (PMI) is due later today at 3 p.m. Economists expect the index to rise to 49.8 in May from 49.2 the previous month, when it failed to maintain earlier traction. In March, ISM Manufacturing PMI pointed to the first expansion in 16 months.

JOLTs

Manufacturing activity will be the first of several tests for the dollar this week. It will be followed by a series of employment data points. On Tuesday, economists expect Job Openings and Labor Turnover Survey (JOLTs) job openings to fall further to 8.35 million in April, a trend in place for the past two years. On Wednesday, automatic data processing (ADP) data should show 180,000 job creations in the US private sector in May. And on Friday, non-farm payrolls: early expectations are for 180,000 job creations in May. The unemployment rate should remain at 3.9%.

Bank of Canada

The market also awaits two central bank decisions. On April 10, the Bank of Canada held its key rate at 5% and refrained from giving any hints on the start of rate cuts. If the Bank of Canada (BOC) noted some price easing across a broad range of goods and services, it pointed at higher-than-anticipated commodity prices, including oil, preventing even disinflation. Also, the latest Canadian inflation eased in April, leading the market to believe that the BOC will cut its overnight rate by 25 basis points to 4.75%.

European Central Bank

A European Central Banks (ECB) rate cut is also widely expected on Thursday. The main refinancing rate is forecast to fall to 4.25%. The deposit facility rate is also seen falling by 25 basis points to 3.75%. European policymakers left little doubt on the outcome of the European Central Bank meeting. Bank of France chief Francois Villeroy de Galhau said, barring a surprise, an ECB rate cut is a done deal. ECB chief economist Philip Lane warned that waiting too long to cut rates could result in inflation falling below target, which would then force the ECB to rush with rate cuts.

Brent crude oil

In recent days, Brent crude oil prices have been trading near $80 per barrel, not high enough for many OPEC+ members to balance their budgets. On Sunday, the organization agreed on an extension of most of its oil output cuts. 3.66 million bpd cuts were due to expire at the end of 2024, and the remaining 2.2 million bpd at the end of June 2024. OPEC+ extended the first lot until the end of 2025 and prolonged the extra 2.2 million bpd voluntary cuts until the end of September 2024. The voluntary cut will be gradually phased out between October 2024 and September 2025.