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Equity performance across the Asian region is mixed ahead of today’s US nonfarm payrolls report, though most markets are on track to end the week positively. Recent trade data from China revealed a larger-than-expected trade surplus in May, driven by a stronger-than-anticipated increase in exports and a slower rate of import growth. This outcome bolsters hopes that China can sustain its growth momentum.At its meeting yesterday, the European Central Bank (ECB) decided to cut interest rates by 25bps, bringing the deposit facility rate down to 3.75%. Additionally, the ECB reduced the main refinancing rate and the marginal lending rate by 25bp each, to 4.25% and 4.50% respectively. This marks the first rate reduction since 2019, following nine months of steady rates. The decision was widely anticipated, as policymakers had signaled the move in advance. The ECB is now the second G7 central bank to reduce rates, following the Bank of Canada’s decision. Meanwhile, the Bank of England and the US Federal Reserve have not yet started cutting rates, and the Bank of Japan has raised rates this year.The ECB provided no definitive signals about future policy changes, maintaining a data-dependent stance and noting that “the Governing Council is not pre-committing to a particular rate path.” This suggests that another rate cut next month is unlikely, especially after recent data indicated persistent wage growth and high services price inflation in the Eurozone. Markets now expect the next rate cut to occur in either September or October. Today, several ECB officials, including Nagel, Simkus, Holzmann, Schnabel, Centeno, and President Lagarde, are scheduled to speak, which will attract market attention as participants try to gauge future policy directions.The focus today is on the US monthly labour market report for May. The April report showed signs of a slowdown in the jobs market, with the economy adding only 175,000 jobs, an increase in the unemployment rate to 3.9%, and a moderation in average hourly earnings growth to 3.9% year-on-year. For May, we anticipate an increase in nonfarm payrolls to 225,000, with the unemployment rate and annual wage growth remaining steady at 3.9%. Unless there is a significant surprise, the US data is likely to support the Fed’s current stance of maintaining interest rates at their current levels for a while longer.In other economic news, the final Eurozone Q1 GDP print is expected to confirm growth of 0.3% quarter-on-quarter. Additionally, the Canadian labour market report for May is forecast to show a further increase in the unemployment rate.
Overnight Newswire Updates of Note
(Sourced from Bloomberg, Reuters and other reliable financial news outlets)
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