World Markets Live - May 5 - CNBC Live Events

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World Markets Live - May 5

We’ll be updating you throughout the day with essential breaking news, data alerts, earnings reports and all the major market movements.

    It's a mixed outlook for U.S. markets today, according to future values, with the Dow set to fall around 20 points.
    Markets finished flat yesterday, hit by some disappointing economic data, including a decline in factory orders.
    Focus today turns to the nonfarm payrolls number. A reading of 185,000 is expected by economists, according to a Reuters poll. The previous reading for March was 98,000.
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    The payrolls figure coming out today is a key indicator of the state of the U.S. economy. A strong number would indicate a tightening labour market, encouraging the Federal Reserve to lift rates in June.
    March's figure of 98,000 was quite weak; market's had expected growth of around 180,000. It was the lowest reading of nonfarm payrolls since May 2016. Retailers cut many jobs, while employment grew in professional, business services and mining, according to Trading Economics.
    Ian Shepherdson, chief economist of Pantheon Macroeconomics, predicts payrolls to have rebounded in April.
    If the underlying trend in payroll growth is about 200K, then a weather-depressed 98K reading needs to be followed by a rebound of about 300K in order fully to reverse the hit. But the consensus for today's April number is only 190K, and our f orecast is 225K. Why the relative pessimism?

    Part of the story is that the impact of severe weather events extends beyond simply keeping people away from work, either because they can't travel or because their place of employment is closed or both. Bad weather also delays hiring plans; if there's no-one in the office, hiring can't happen.
    The following month's survey, then, captures the return of employees who couldn't work because of the weather, but it is constrained by the impact of delayed hiring. 
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    The IMF's deputy managing director Mitsuhiro Furusawa has warned that Japan has reached a stage yet where the Bank of Japan can withdraw monetary stimulus, according to Reuters report.
    He says Japan should proceed with gradual increases in its sales tax. 
    This comes after the Bank of Japan's governor this morning said Japan's inflation expectations are still not anchored around its 2 percent price target. Kuroda admitted achieving the price target in a timely manner is a challenge.  He did say output gaps will improve, putting upward pressure on prices and wages. 
    The BOJ currently has interest rates on hold at minus 0.1 percent. The interest rate  reached this record low in January last year.
    Here's a look at how rates have changed over the past 10 years.
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    Here's how markets reacted to the U.S. April jobs data.
    The dollar index initially rose on the news, before turning flat. The dollar briefly hit a session high against the yen, while euro hit a session low. Here's how dollar is trading right now.
    Yields on U.S. treasuries initially rose, but are now ticking lower. The 2-year yield was 1.326 percent before the report, while the 10-year was 2.363 percent. Here's how the yield curve is looking.
    Stock market futures were little changed on the jobs report. The S&P and Nasdaq rose slightly, while the Dow trimmed its expected losses.
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    Meanwhile, European markets are performing well. The pan-European Stoxx 600 is recording gains. It looks set to finish the week around 1.5 percent higher.
    We also have green across the boards of the major individual bourses. The French CAC 40 is up around 0.6 percent. the market is buoyant ahead of the French presidential election, with several polls predicting Emmanuel Macron to win with a decent margin.
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    The second round of the French presidential election take place on Sunday.
    Join us live on CNBC and World Markets Live as we cover the election results and find out whether Emmanuel Macron or Marine Le Pen will become the next president of France.
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    U.S. markets are now open, with the S&P and Nasdaq recording gains. Investors are digesting the April jobs number and the hourly earnings data.
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    It's been a choppy week for the Dow Jones. The index is currently down a few points, and looks set to make small loss for the week if it doesn't make gains.
    These are the worst stocks on the Dow, leading it lower. IBM is weighing most on the index, falling more than 3 percent to near a 6-month low. The stock is suffering after Warren Buffett announced his company had reduced its stake in the firm by 30 percent.
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    Russia's defence minister has discussed ensuring a Syrian peace deal, according to Russian news sources.
    Sergey Shoygu, the country's defence minister, says safe zone agreements in Syria will come into force from midnight tonight, TASS reported.
    Shoygu says the agreement is supported by the UN, U.S. and Saudi Arabia to guarantee its implementation.
    He added that the U.S. position allowed them to create conditions for a political settlement in Syria.
    Sergey Shoygu
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    The April payrolls data came in higher than expected at 211,000. That follows a revision March reading of 79,000 caused by bad weather.
    Jim O'Sullivan, chief U.S. economist at High Frequency Economics, says weather effects were fairly neutral in April.
    While there is no direct measure of weather effects in payrolls, the not seasonally adjusted household survey series on the number of nonfarm workers with a job who did not work because of bad weather fell by 83K, identical to median decline in the past 10 April reports.


    In short, payrolls rose strongly after weather-exaggerated weakness in March. Through the volatility, gains have averaged 185,000 so far this year, almost identical to the 187,000 in 2016. The pace remains more than strong enough to keep unemployment trending down, even if this month's decline in the unemployment rate was due more to the participation rate declining than the strength in employment.
    On the weaker side, the modest uptrend hourly earnings numbers seems to have stalled in recent months, although the ECI and the comprehensive labor costs data from the productivity and costs report show more acceleration. Net net, the data are more than strong enough to keep the Fed on track for tightening again at next months's meeting.
    Ian Shepherdson, chief economist at Pantheon Macroeconomics, says falling unemployment will scare hawks at the Federal Reserve, as the unemployment rate has fallen from 4.8 percent in January to 4.4 percent in March, below the Fed's Nairu range of 4.7-to-5.0 percent.
    Given the long lags between rate hikes and shifts in labor market conditions, Fed hawks will now be even keener to see rates rise further, despite the levelling-off in hourly wage growth in recent months. The y/y rate, three-month average, has been 2.7% for the past nine months.
    They will argue - correctly, in our view - that all the risk is to the upside and the Fed cannot base policy on the hope that wages will somehow fail to re-accelerate even as the unemployment rate approaches 4%. The June hike is more or less done, but we think marketshugely underestimate the risk for September, when we expect the Fed to hike again.
     U.S. stock markets haven't moved much on the result of the jobs data. Here's a look at how the three indexes have changed over this week.
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    IBM shares are sliding today, down more than 2 percent, as the "Buffett premium" is priced out.
    The oracle of Omaha revealed to CNBC his company had sold 30 percent of its stake in IBM, citing his disappointment with IBM earnings.
    I don't value IBM the same way that I did 6 years ago when I started buying... I've revalued it somewhat downward. When it got above $180 we actually sold a reasonable amount of stock.

    Warren Buffett said the company hadn't performed the way he had expected when he first bought the shares six years ago.
    I think if you look back at what they were projecting and how they thought the business would develop I would say what they've run into is some pretty tough competitors. IBM is a big strong company, but they've got big strong competitors too.
    Over 3 months, shares in IBM have fallen 11 percent.
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    The April payrolls data remains in focus. 211,000 jobs were added last month.
    However, Michael Moran from Daiwa Capital Markets America was critical of data, saying the breakdown of which industries were gaining jobs was less impressive than the headline figure suggests.
    Much of the growth occurred in the leisure industry, where many of the jobs involve below-average wages. In addition, results in cyclical sectors -- construction and manufacturing -- were on the light side. Construction employment rose 5,000 in April after an increase of 1,000 in March, but increases from September through February averaged 28,000. In manufacturing, the increase of 6,000 lagged the average of 16,000 from December to March
    Moran said the it was overall a good jobs report, with some soft elements, such as the modest growth in the labor-force and hesitant hourly earnings growth, but added the report is strong enough to support the Fed's normalization process.
    Sal Guatieri, senior economist and director of economic research at BMO Capital Markets, echoed these comments, and added that a June rate hike is a definite possibility.
    The April jobs report fits the FOMC’s description of the labour market perfectly (“solid”), as well as its view that Q1’s GDP stumble is “likely to be transitory”. With the unemployment rate now perched slightly below the Fed’s forecast for the next three years (4.5 percent) and meaningfully below its long-term estimate (4.7 percent), the need to continue walking the normalization path is pretty clear.
    We’ll hear from Yellen, Fischer and a raft of other officials later today. The thrust of their comments should keep the June door swinging wide open for a rate hike. 
     Yields on shorter dated Treasury notes are rising this afternoon, indicating that bond markets are perhaps beginning to price in a June interest rate hike.
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    Around half an hour to the close of European markets. The pan-European Stoxx 600 is currently up almost 0.5 percent.
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    This Sunday, CNBC will be covering the results of the French presidential election between Emmanuel Macron and Marine Le Pen
    We'll be live on air and on World Markets Live from 5 p.m. GMT.
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    Emmanuel Macron remains the favourite to win this weekend's presidential election. 
    Antonio Barroso, deputy director of research at Teneo Intelligence, has an 80 percent probability of winning.
    The former economy minister has recovered considerable momentum in all opinion polls following his solid performance in Wednesday’s TV debate and is in a strong position to defeat Marine Le Pen by a wide margin on Election. 
    The candidates' election campaigns come to an end at midnight tonight. Barroso says the key things to watch on Sunday after the polling stations close are the polls (for an indication towards the parliamentary elections) and Marine Le Pen's score.
    Le Pen’s political survival and even a victory in 2022 – if Macron fails to deliver – are foregone conclusions in the eyes of many commentators. Yet none of this is certain. Recall that there are deep divisions in the National Front (FN), exemplified by the rift between vice president Florian Philippot and MP Marion Marechal-Le Pen.
    A poor performance by Marine Le Pen on Sunday (below 35 percent of votes) would probably be considered as a disappointment by many inside the party. If the knives come out in the hours following the publication of the results, this will probably generate a negative dynamic for the FN ahead of the legislatives. A bad result for Marine Le Pen in the presidential contest combined with an underwhelming performance of her party in the mid-June elections would put her in a very difficult position
    Teneo Intelligence have also produced a handy timetable for what to expect on Sunday's election.
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    'Halo', 'Pokemon' and 'Street Fighter' added to the video game hall of fame

    In lighter news, iconic games including "Street Fighter" and "Donkey Kong" are among the five classic video games announced as new additions to the World Video Game Hall of Fame.
    Which ones, if any, have you played?
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    Here's what Alessandro Tentori of AT Economics and Markets had to say on the nonfarm payroll data.
    The most interesting sub-trend is the 281,00 drop in involuntary part-time workers. On the wages front, still not a huge pressure, but 2.5 percent yoy was consistent with much tighter policy in the past. Fed researchers are expecting wages to pick up as we proceed in the year, so do I. 

    In a nutshell: The economy is at full employment and any further tightening of the labor market would translate into overheating risks, especially when it comes to cost-push inflation. Too little is priced in with FFZ7 (30-Day U.S. Federal Funds) trading at 73/74.
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    European markets are now closed. The pan-European Stoxx 600 finished the session up more than 0.5 percent on recovering oil prices and boosted confidence that Macron will win the French elections.
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    France, Spain and Italy were the big winners among European markets today, seeing gains of more than 1 percent.
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    Pearson was the big gainer in European markets, topping the Stoxx 600 index.
    The U.K. company announced a new cost-cutting drive and a strategic review, including potentially selling its U.S. school courseware business.
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    The Federal Reserve's Stanley Fischer says the Fed should not have to apply mechanical policy rules to decision-making, effective saying the Fed doesn't need to be tied down by rules, he told reporters.
    He says the rate-setting committee has strengths the policy rules do not. The committee could consult policy rules rather than blindly follow them. However, he said a more flexible policy require more transparency, Reuters reported.
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    A last look at U.S. markets.
    The main indexes are broadly flat today, despite the strong payrolls data which came out earlier today.
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    We'll close the blog there. Remember to join us on Sunday live as we cover the results of the French presidential election.
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