US Jobs Reports

Economic data has entered a position where readings that are too hot mean quick everyone worry about the fed hiking more and too cold bolsters fears of a recession/hard landing. An optimal data release should sit right about in the middle, and fortunately that’s exactly what we got on Friday with the US Jobs reports. All of the payrolls (+209,000), the unemployment rate (3.6%), and wage growth (+4.4%) came just in range of their moderate expectations, skewing a little hot on wages. The Fed remained hawkish in Wednesday’s FOMC meeting and the unshocking data here all but confirms a hike in July. 

Markets Price-In Elevated UK Interest Rate by 2024

Last week, traders bet that interest rates would reach 6.5% by March of 2024 in the UK. This move comes after a stark rise in rates priced in by swap markets, increasing the peak rate level drastically over the past few weeks from 6.25% to 6.5%. Such a move would be devastating for prospective UK home buyers, increasing the costs of financing for borrowers. Headline inflation rose 8.7%, further prompting the race to decrease inflation by raising rates. 

Service and Manufacturing PMI

ISM service and manufacturing PMI this week are the other important economic indicators that came out this week. PMI tells the strength of the service and manufacturing sector of the US. A value over 50 represents expansion and under means contractions. The Manufacturer PMI hit a new low of 46, continuing its fall. The Services PMI continues to reach newer highs, reaching 53. The indicator are key in influencing the FEDs decisions. 

Record-breaking U.S. oil production helps thwart Saudi efforts to drive up prices

U.S. crude oil production is on track to set a record this year, up 9% Y/Y through April, helping to keep energy prices stable and blunt the efforts of Saudi Arabia and other oil exporters to drive them higher. The Energy Information Administration has forecast total U.S. output will hit 12.61M bbl/day in 2023, topping 2019’s record of 12.32M bbl/day and easily beating last year’s 11.89M bbl/day. OPEC and its allies have announced cuts this year amounting to ~6% of 2022’s production, but Rystad Energy estimates output in countries outside OPEC is making up for about two-thirds of the reductions, and crude prices have slid 13% YTD.