Today's focus will be on the March jobs report

In focus today

• In the US, today's main event will be the March Jobs Report. We expect non-farm payrolls growth to slow down to 180k and see average hourly earnings growth at +0.2% m/m SA. For more details on today's Jobs Report, please see our latest US Labour Market Monitor - Supply-driven recovery, 4 April.  

• In the euro area, we look out for retail sales to see how consumption fared in February. A rebound in consumption is key for the growth outlook in the euro area this year.

• In Germany, we receive data on factory orders for February which will give more information on the state of the German industry that still is very weak.

Economic and market news

What happened overnight

In Japan, Finance Minister Suzuki emphasized the importance of stability in the FX market, highlighting that excessive exchange-rate fluctuations were undesirable and restating the government's readiness to intervene in cases of sharp yen depreciation. Market speculations suggest that if the USD/JPY exceeds the 152 level, the government would react with direct intervention. That happened in 2022, where USD/JPY also flirted with the 152 mark, which made the Japanese government intervene. As of now USD/JPY is trading around 151.25.

What happened yesterday

In the US, jobless claims came in higher than expected at 221k (cons: 214k), reaching the highest level since late January, while continuing claims fell slightly. The release painted a mixed picture, though labour markets remain very strong. However, it should be noted that claims data tend to be noisier around holidays. Prior to the release, the March Challenger Report also showed another uptick in announced layoffs. Tech companies accounted for the largest share of layoffs, with 'cost-cutting' named as the most common reason.

In the euro area, the final PMIs were released, with the composite PMI being revised slightly up in March to 50.3, while the services PMI was revised up to 51.5. Importantly, the composite PMI is now above 50 for the first time since May 2023, indicating some gradual improvement in an economy that had been stagnant.

The ECB minutes yesterday contained limited new information but included some nuances to the discussion within the ECB's governing council, notably the disinflationary process continuing, yet it may be a bumpy road ahead. This morning, we published our ECB preview ahead of next week. While this meeting may be considered an interim meeting and lead to limited market reaction we expect the ECB to deliver a clear commitment to a June rate cut, in the form of explicit guidance of an 'intention to cut by 25bp in June'. For more details, please see ECB Preview - An intention to cut, 5 April.

In Norway, housing prices for March was 0.6% m/m SA, clearly confirming the increasing optimism (or maybe less pessimism) among households at the moment.

In the UK, final PMIs for March were slightly lower than preliminary prints, with the composite PMI at 52.8 (prelim: 52.9), and services at 53.1 (prelim: 53.4). The PMIs indicate a modest rebound in growth following a technical recession at the end of 2023.

In Switzerland, inflation surprised to the downside as headline came in at 1.0% y/y (cons: 1.3%), while core printed 1.0% y/y (cons: 1.2%). Importantly, the m/m SA measures showed broad easing for headline (-0.15%) and core (0.1%).

In Poland, the Polish central bank kept its policy rate unchanged at 5.75%, as widely expected.

In Japan, the largest union group Rengo announced that Japanese firms offered average wage hikes of 5.24% after the third wage tally. Overall, it appears that wage pressures have indeed spread beyond big businesses, putting the Bank of Japan in a comfortable situation. Next is the final wage tally, which will not be published until early July.

In commodities, Brent continued north, settling above USD90/bbl for the first time since October, partly fuelled by escalating geopolitical tensions. This morning, the price has exceeded the USD91/bbl mark.

Equities: Global equities were lower yesterday, dragged down by the US and fear of renewed central bank hawkishness in equity space. S&P 500 made a turnaround halfway through the session with an intraday move above 2% and the biggest loss since February 2013. VIX lifting to 16 with bears getting airtime and uncertainty increased. Please note that energy was still the best performing sector while industrials and materials outperformed the larger part of the defensive space. Hence, this is not about a full risk-off move due to weak growth outlook but rather fear of inflation challenges down the road. Interestingly, this renewed fear in equity space comes with a lag of what we have seen in the bond space, and it comes in a week where macro/price data has been very benign. The trigger is two-sided, with central bank members changing their tones, yesterday it was Kashkari acknowledging the possibility of not cutting this year. Secondly, oil prices are moving higher with the geopolitical tensions rising in the Middle East. In US yesterday, Dow -1.4%, S&P 500 -1.2%, Nasdaq -1.4% and Russell 2000 -1.1%. Asian markets are lower this morning following the weak session in the US. European futures are catching down to the US cash session yesterday while US futures are marginally higher this morning.

FI: The European bond market was quite volatile yesterday. The European PMI and the US jobless claims sent yields lower, yet outside those 'release windows' the yields trended higher amid also Fed speakers downplaying the need for imminent rate cuts. 10y Bund yields ended 3bp lower on the day at 2.35% with Italy being the clear outperformer yesterday in a BTPs-Bund spread tightening of 7bp to end at 137bp.

FX: EUR/USD continued to drift higher in yesterday's session, surpassing 1.0850 with all focus on today's US jobs report. EUR/GBP moved higher during yesterday's session trading close to the 0.86 mark following softer data out from the UK. EUR/CHF continued its upward trajectory during yesterday's session following a sharp downside surprise to Swiss inflation in March. NOK FX performance during yesterday's session was hugely influenced by the report released Wednesday (after close) from the work group on government transactions consisting of employees from Norges Bank and the Ministry of Finance. For spot FX we regard the announcement as a medium- to long-term negative.