Jobs report key as we wait to see if soft data declines will transmit to hard data

European markets are on the rise in early trade today, as the optimism seen over the course of the past week continues apace. Coming off the back of recent comments out of the White House that US-China tariffs would likely be reduced, there is an optimism that the current sky-high rates of tax on trade between the world’s largest countries represent the worst it will get. Notably, we are seeing a welcome push higher for European carmakers, with the likes of Volkswagen and Porsche clearly taking back lost ground as traders welcome the somewhat softer tone from Trump last week.

While we have spent much of the past week seeing risk assets regain lost ground, there is a case for the bears to soon return if we see data sour before any resolution is found to the current collapse in trade relations between the US and China. Thus far we are yet to see the hard data make any notable deterioration, with soft data instead providing the warning signs. With that in mind, while Tuesday’s consumer confidence survey will likely show further signs of deterioration, it will be the April jobless claims, ADP and jobs report which could really bring the bears back into play.

This week sees four of the Mag7 names report, with earnings playing a key role in driving sentiment as we move forward. Alphabet earnings provided a nod to the fact that we are starting to see companies produce notable gains from their AI investments, with the advertising business particularly enjoying benefits from the adoption of this new technology. There is a hope that we will see some of the other mag7 names follow suit, pushing back against the negative sentiment that has blighted markets over recent weeks. Nonetheless, it is notable that in the absence of any breakthrough in negotiations between China and the US, we could soon see traders discount the impact of strong Q1 earnings in anticipation of a sharp Q2 drop-off.