The US labor market remains resilient. China simulates an attack on Taiwan

A Nonfarm Payrolls report on Friday showed that US nonfarm payrolls rose by 236,000 in March, in line with a forecast of 239,000. February's data was revised upwards. 326,000 jobs were added instead of 311,000. The US unemployment rate fell to a record low of 3.5%. At the same time, annual payrolls rose at the slowest rate since June 2021. Although the employment report showed significant growth, some sectors saw moderate declines, particularly manufacturing, and construction. But overall, such data leaves the US Federal Reserve with room for another rate hike at the next meeting. The market currently estimates a 70% probability that the Fed will raise interest rates by 25 basis points in May. The US stock indices did not trade on Friday due to the holidays. By the end of the week, the Dow Jones Index (US30) increased by 1.77%, and the S&P 500 Index (US500) jumped by 1.20%. The NASDAQ Technology Index (US100) gained 0.47% in 5 days.

Tesla (TSLA) announced plans to build a new plant in Shanghai to produce energy storage products.

Equity markets in Europe were also closed Friday. By the end of the week, German DAX (DE30) gained 0.19%, French CAC 40 (FR40) added 0.74% over the week, Spanish IBEX 35 (ES35) gained 0.89%, British FTSE 100 (UK100) jumped by 1.59% over five trading days.

According to the ECB Governing Council spokesman Klaas Knot, Europe's central bank should continue to raise borrowing costs, with a slower pace of tightening being justified. The Dutch banker also added that even if the ECB reaches an interest rate level that the bank believes will return inflation to 2% in the medium term, the ECB may have to hold interest rates at this peak level for a long time.

Last week Israel's Central Bank softened the pace of monetary policy tightening, recognizing the potential risks to monetary policy posed by the government's scandalous "judicial reform." Sri Lanka kept rates unchanged after receiving a loan from the International Monetary Fund, while Australia, Romania, Chile, Poland, and India also kept borrowing costs unchanged.

Oil prices remained stable at the end of last week. Investors are weighing the prospect of supply cuts by OPEC+ producers in May against concerns about weakening global growth, which could reduce demand for the fuel. Investors are also watching the progress of negotiations between Iraq and "Kurdistan" to restart northern oil exports, which could bring more oil to the global market.

Asian markets mostly rallied last week. Japan's Nikkei 225 (JP225) declined 2.43% over the week, China's FTSE China A50 (CHA50) was little changed over the week, Hong Kong's Hang Seng (HK50) gained 0.30% over the week, India's NIFTY 50 (IND50) added 3.52%, and Australia's S&P/ASX 200 (AU200) was positive 1.30% over the week.

An analysis of global financial conditions shows that Asian financial markets have tightened less than in the US, and most Asian currencies have strengthened against the US dollar. Except for Japan, the region's financial stock index has risen since 10 March (the day of the Silicon Valley bank crash) compared to the US bank index's fall of almost 10% over the same period. This suggests that the Asian economy remains relatively well insulated from the US and European economies. Economists believe one factor favoring the Asia-Pacific region is a generally softer turn in monetary policy, with central banks in Australia, South Korea, Indonesia, and India putting tightening cycles on hold.

According to analysts, Hong Kong and Thailand, which are benefiting from China's reopening, as well as domestic service-oriented economies such as India and the Philippines, "look relatively more resilient" to the global shock. And Singapore will be the main beneficiary of growth in the region.

Japan is poised to sharply increase its spending on chips as it tries to consolidate its position in the global semiconductor market, as it cuts exports amid a US drive to curb China's technological ambitions. Japan is expected to spend $7 billion on manufacturing equipment next year, up 82% from this year.

The Chinese military simulated spot strikes on Taiwan on the second day of exercises around the island on Sunday, with the island's defense ministry reporting several air force sorties and keeping an eye on Chinese missile forces. The US embassy in Taiwan said on Sunday that the United States was closely monitoring China's drills around Taiwan and was confident that it had enough resources and capabilities regionally to ensure peace and stability. For his part, French President Macron said after a visit to China that Europe should reduce its dependence on the United States and avoid becoming embroiled in a China-US confrontation over Taiwan.

In the commodities market, futures on coffee (+6.92%), WTI oil (+6.33%), Brent oil (+6.32%), sugar (+6.20%), gasoline (+4.55%), silver (+4.03%) and lumber (+2.99%) showed the biggest gains last week. Futures on natural gas (-8.17%), corn (-2.42%), and wheat (-2.42%) showed the biggest drop.

S&P 500 (F) (US500) 4,105.02 +0 (+0%)

Dow Jones (US30)33,485.29 +0 (+0%)

DAX (DE40) 15,597.89 +0 (+0%)

FTSE 100 (UK100) 7,741.56 +0 (+0%)

USD Index 102.10 +0.27 (+0.27%)

• – US FOMC Member Williams Speaks at 23:15 (GMT+3).

by JustMarkets, 2023.04.10

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.