Global stocks are edging lower, pulling Wall Street futures modestly into the red, as investors prep for today's crucial U.S. employment report. With markets keying on wage and job creation data as stocks test all-time highs, here are five things you need to know before the start of trading on Friday July 5.
1. -- Workin' For a Livin'
U.S. employers likely added 160,000 new jobs to the economy last month, according to Wall Street forecasts ahead of today's June non-farm payrolls report at 8:30 am Eastern time. That's more than enough to hold the nation's jobless rate at a 50-year low of 3.6% for the whole of the second quarter, but will it alter market expectations of a Federal Reserve rate cut when the central bank meets later this month?
Much will depend on the strength of average hourly wage gains, analyst say, with pay expected to rise by 0.3% from last month, taking the annual gain to 3.2%, solidly ahead of headline inflation rates but perhaps not fast enough to sustain consumer spending, a key component on U.S. economic growth.
The CME Group's FedWatch tool suggests investors are only pricing-in a 25% chance of a 50 basis point rate cut later this month, against the near-certainty of a 25 basis point reduction, but if either wage or job creation figures disappoint, those odds will change quickly and will have big implications for the market's direction throughout the session.
2. -- Forget Andre, It's S&P 3,000!
With all due respect to the American rapper Andre 3,000, the bigger 3K figure in focus today is undoubtedly the potential for the S&P 500 to breach the 3,000 point mark today if investors either take solace in a solid U.S jobs markets, and better-than-expected employment gains, or extend bets on deeper Fed rate cuts if the figures disappoint.
Either way, with the S&P 500 within just a few points of that historic barrier, after closing at an all-time high of 2,995.82 points in a holiday-shortened trading session on Wednesday, global investor focus will be firmly on Wall Street today as stocks continue to pace the world's financial markets.
U.S. equity futures suggest modest declines at the moment, however, with contracts tied to the Dow Jones Industrial Average indicating a 30 point bump lower while those linked to the S&P 500, which has gained a world-leading 19.5% so far this year, are guiding to a 2.4 point dip.
In Europe, the Stoxx 600 fell 0.3% lower in Frankfurt, with smaller percentage declines from benchmarks around the region, after a much weaker-than-expected reading for May industrial orders from Germany while shares in Asia drifted from recent multi-month highs to pull the MSCI ex-Japan index into a 0.1% loss on the session.
3. -- Samsung Can't Cash Chips
Samsung Electronics (SSNLF) shares ended lower in Seoul, pulling Asia stocks lower and clipping pre-market gains for U.S. tech rivals, as it forecast its third consecutive quarterly profit decline Friday, as the U.S. blacklisting of China's Huawei Technologies and a glut in global semiconductor markets continues to hit the bottom line of the world's biggest smartphone chipmaker.
Samsung said it sees second quarter profits falling 56% from last year to 6.5 trillion Korean won ($5.6 billion, a modestly better-than-expected figure that was flattered by one-time boosts in its business display division, but still the third straight year-on-year slump in bottom line profits. Group revenues, are likely to fall 4.2% to 56 trillion Korean won, Samsung said in its traditional pre-earnings forecast. Official figures are expected on July 31.
The concern echoes last month's warning from U.S. chipmaker Broadcom (AVGO) , whose CEO Hock Tan said that a prolonged U.S.-China trade war, as well as the extended blacklisting of Huawei, would disrupt global chip demand and clip it near-term profit potential.
4. -- Bond ... Government Bond.
While hardly as exciting an introduction as the one famously delivered by Her Majesty's top spy James, global government bond markets are nonetheless getting pulses racing on Wall Street Friday as borrowing costs test fresh record lows, and possibly the patience of President Donald Trump.
Dovish central bank signalling has taken the value of global sovereign debt, which moves in the opposite direction of bond yields, to an all-time high of $54.5 trillion. And while benchmark 10-year German bund yields, a proxy risk-free borrowing rates in Europe, fall to a fresh record low of -0.4% Friday, the value of European government debt that trades with a negative yield increased to an all-time high of €5 trillion - a staggering 64% of the entire outstanding pool.
In fact, nearly a quarter of the world's debt markets -- worth around $13 trillion -- are trading with a negative yield, that's added downward pressure to most major global currencies and drawn the ire of the President himself.
"China and Europe playing big currency manipulation game and pumping money into their system in order to compete with USA," Trump wrote on his always-active Twitter feed Wednesday. "We should MATCH, or continue being the dummies who sit back and politely watch as other countries continue to play their games - as they have for many years!".
5. -- I Love a Parade
President Donald Trump praised America's "history, our people, and the heroes who proudly defend our flag -- the brave men and women of the United States military" during a Fourth of July parade and speech from the Lincoln Memorial in Washington, DC Thursday attended by tens of thousands of well-wishers who braved a long day of rain and beef-up security to attend the national celebrations.
The National Parks Service, which say $2.5 million in funds diverted to pay for the day-long "Salute to America", did not provide an estimate for the day's attendance, but Trump himself Tweeted his pleasure for the "great crowd" that surrounded the Mall and watched a thrilling fly-over from both Air Force One and the F-18 Blue Angels.
"We celebrate our history, our people, and the heroes who proudly defend our flag: the brave men and women of the United States military," Trump said during a 45 minute speech that was following by more than half an hour of pyrotechnics. "For over 65 years, no enemy Air Force has managed to kill a single American soldier. Because the skies belong to the United States of America."