US jobs in focus, with ADP set to moderate after last month’s bumper 233k figure

A mixed start to trade in Europe has seen mainland equities gaining ground as the FTSE 100 struggles for traction. Political turmoil in both France and South Korea provide a uncertain backdrop for global markets, with the likely removal of both Barnier and Yoon bringing the potential for both countries to find a fresh direction. This morning has seen a raft of PMI surveys out of the eurozone, with the collapse in Italian services grabbing the headlines in particular (49.2 From 52.4). The market expectations around the ECB point towards a faster pace of easing compared with their US and UK counterparts, and the contraction in Italian, French, German, and eurozone services sectors serve to further highlight the need to act swiftly.

The Bank of England are likely to take on a more cautious approach to easing according to Andrew Bailey, with the Governor reiterating a view that they will likely cut rates by 100 basis points next year. The stronger UK services PMI reading of 50.8 brought fresh concern at Threadneedle street, with the overall rate of prices charged inflation edging up to the highest level since July. Coming off the back of a UK CPI report that saw a concerning 0.6% reading for the month of October alone, the risk of a resurgence in price pressures does put a dampener on expectations of a sharp decline in rates this coming year.

Looking ahead, the US data looks set to ramp up, with the ADP payrolls report providing a fresh insight into the jobs markets after yesterday’s welcome rebound in job openings. The 7.74 million JOLTS figure reported yesterday came thanks to a surge in private hiring and federal job opportunities fell ahead of the new turnover in the White House. Nonetheless, those celebrating this improved figure will do well looking further out and noting that the trend remains firmly on a downward trajectory despite one good month. Today’s ADP report provides an opportunity to bring clarity after last month’s huge differential between ADP (233k) and headline (12k) payrolls figures. With the S&P 500 approaching a fresh high, markets will be looking for signs of economic strength to build on the perception that the country is moving into a phase that will see businesses boom under Trump’s Presidency.