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(Il Sole 24 Ore Radiocor) – European stock markets extend their gains after the release of the April employment report in the United States, worse than expected, which rekindles hopes for a Fed rate cut. Meanwhile, the indexes on Wall Street are rising, with the Nasdaq of technology stocks supported by Apple, which on the eve presented quarterly accounts which show profits and revenues falling but less than expected. Meanwhile, employment numbers have also arrived in Italy, with the unemployment rate falling to 7.2% in March.
Investors have now digested the indications of the president of the Federal Reserve, Jerome Powell, on interest rates, which will remain high for a longer time than expected but there will be no further increase. Thus the FTSE MIB of Milan is weak, weighed down by a heavy banking sector, among other things awaiting the judgment of Fitch Ratings, which will arrive in the Italian evening. Observers expect the rating to be left unchanged at “BBB” with a stable outlook. The CAC 40 in Paris, the DAX 40 in Frankfurt, the IBEX 35 in Madrid, the AEX in Amsterdam and the FT-SE 100 in London rose more decisively.
In the US less than 200,000 new jobs in April, below estimates
The April jobs report came in lower than expected in the United States. Last month, 175,000 jobs were created (excluding the agricultural sector) compared to the previous month, while analysts expected an increase of 240,000 jobs (303,000 jobs were added in March). Unemployment rose from 3.8% to 3.9%, against expectations for a confirmation of 3.8%. Average hourly wages rose 7 cents, or 0.20%, to $34.75; compared to a year earlier, they increased by 3.92%. The average work week decreased by 0.1 hour to 34.3 hours. Workforce participation stood at 62.7%, 0.7 percentage points away from February 2020 levels, before the onset of the coronavirus pandemic.
The March figure was revised from 303,000 to 315,000, that of February from 270,000 to 236,000, for a total of 22,000 fewer jobs than what was communicated last month. In the 12 months leading up to April, the monthly average was 242,000 jobs created. Unemployment rose by 0.1 percentage points to 3.9%, within the range between 3.7% and 3.9% in which it has fluctuated since last August.
Wall Street rises, Treasury yields fall
Wall Street opened higher after the US employment report in April, which caused a sharp decline in Treasury bond yields. The indices are returning from a positive session, with gains between 0.85% and 1.5% for the three major indices, which however could record a negative week: the S&P 500 is losing 0.7%, the Nasdaq almost 0.6%, while the Dow is flat. The markets welcomed the words of the president of the Federal Reserve, Jerome Powell, who defined an increase in interest rates – confirmed at 5.25%-5.50% – as the Central Bank’s next move as “unlikely”; inflation, however, remains “too high”. Worse-than-expected labor market data, however, rekindle hopes for a cut in the cost of borrowing sooner than expected. According to the CME Group’s FedWatch Tool, practically taking it for granted that the Fed will leave rates unchanged also in June and July, there is over 40% possibility that the Central Bank will cut rates by 25 basis points in September .