The UK jobs market remained buoyant in April despite yesterday’s poor industrial and manufacturing production figures. With the pound pushing higher, we are seeing the FTSE come under pressure. Meanwhile, US markets remains data-sensitive, as PPI and CPI figures approach.

  • Pound surges higher after positive jobs report

  • Search for new leader continues, as Boris lurks in the background

  • UK markets eye PPI and CPI data amid shifting rate expectations

The pound is surging higher today, as a batch of impressive jobs numbers helped dispel the negativity that has been evident in the wake of yesterday’s disappointing GDP, industrial and manufacturing production figures. As the UK seeks to find a new Prime Minister, Boris Johnson has been a notable absentee throughout the clamour for support. The numbers have been whittled down to 10, and that number will dwindle as we progress through the coming week. However, for markets the key element to gauge is whether the new leader would be willing to take the UK out of the EU without a deal or not. For the most part, a no-deal leader is essentially a general election/second referendum leader given the difficulty of passing such a proposal through parliament.

April was clearly a difficult month for the UK economy, with yesterday’s data points highlighting a substantial decline in activity for carmakers in particular. However, today has seen a different side to the month of April, with better than expected wage growth signalling continued confidence despite the temporary effects that came about as a result of the 29 March Brexit deadline. A welcome downward revision to April claimants made up for the elevated May figure, yet for the most part the rise in sterling is reflective of the market sensitivity to wage growth data.

Markets have become increasingly sensitive to US data in the wake of disappointing ADP and headline payrolls figures. The shift in rate cut expectations leads us into a situation where markets expect two rate cuts in the next three meetings. With the US PPI up today, and CPI tomorrow, we are expecting further volatility that will see the dollar back in focus after recent declines. With the Mexico issue seemingly resolved, the US will likely turn its energy back towards China, with the sharp rise in Chinese stocks highlighting growing expectation that both sides will work towards a deal. However, with the US election up ahead, the likeliness is that Trump will see the benefit of holding out as a show of strength.

Ahead of the open we expect the Dow Jones to open 88 points higher, at 26,151.

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