Market Reaction to U.S. Debt Ceiling Vote Muted Ahead of Payroll Data Release

June 2, 2023

U.S. share price futures are up 0.6% from Thursday’s close. The weighted DXY dollar index has dipped 0.1%, and the 10-year U.S. Treasury yield is a basis point higher. Prices for oil and Bitcoin are up 1.6% and 1.1%, but that for gold is unchanged. More volatility has been seen in foreign stock markets, featuring a 4% jump in Hong Kong’s Hang Seng index and 1.2% advances in the indices of Japan, Taiwan, Germany and France.

Euroland’s manufacturing purchasing managers index fell in May to a 36-month low of 44.8. The German, Italian, Irish, and Dutch readings were also at 36-month lows. Among euro area members, only Greece’s 51.8 score exceeded the 50 threshold between contraction and expansion. The British manufacturing PMI of 47.1 signaled the sharpest rate of contraction since January.

Japan’s manufacturing PMI improved 1.1 points to a 7-month high of 50.6 but was revised down from the initial estimate of 50.8. China’s manufacturing PMI index rose 1.4 points to a 3-month high of 50.9. India’s 58.7 PMI reading beat expectations and reflects the fastest expansion in 31 months.

Turkey’s 51.5 PMI reading matched April’s four-month high. The manufacturing PMI scores of 48.4 in Australia and 53.6 in Russia in May were their highest marks in 2 and 3 months, respectively.

French industrial production performed more strongly than forecast, rebounding 0.8% in April following March’s 1.1% slide and was 1.3% higher than a year earlier.

South Korean CPI inflation continued to recede in May, slowing to a 19-month low of 3.3%, from a 284-month peak of 6.3% hit last July. Cypriot CPI inflation, which crested last July as well (at 10.9%) dropped to a two-year low of 3.0% in May after 3.7% in April.

Irish GDP slumped 4.6% last quarter (its first quarterly drop in five quarters) and posted the first year-on-year dip (albeit just 0.2%) since the summer of 2016.

South Korean GDP increased 0.3% last quarter, reversing the previous quarter’s contraction but resulting in the smallest year-on-year advance (0.9%) in nine quarters.

As in the U.S. House of Representatives, the Senate’s vote to raise the debt ceiling attracted bipartisan support and produced a more lopsided 63-36 margin than anticipated. Investors still felt that the Fed’s decision to pause or hike the federal funds target later this month, is likely to be influenced heavily by today’s U.S. employment situation figures.

A broadly stronger-than-forecast set of U.S. laborĀ  market statistics in May has been released, featuring a 339k leap in jobs, significant upward revisions to employment growth in March and April, and just a 0.1% downtick in the 12-month increase of average hourly wages to 4.3%. Labor market participation remained at 62.6% for a third straight month. Despite the steep rise of the Fed’s interest rate since March 2022, the 339k rise last month in non-farm employment was the most since January and very close to its average monthly advance of 341k over the past year.

Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

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