June 1, 2018, by Lorcan Roche Kelly
U.S. allies reacted with a mixture of anger and threats to the imposition of metal tariffs on their exports of steel and aluminum. Canadian Prime Minister Justin Trudeau said the move was “ totally unacceptable” as his administration announced it will impose duties on as much as C$16.6 billion ($12.8 billion) of U.S. steel, aluminum and other products from July 1. Europe and Japan issued a joint statement condemning the move with the EU saying it would bring a case against the U.S. to the World Trade Organization. Treasury Secretary Steven Mnuchin received a cold welcome at yesterday’s G-7 meeting in Canada amid worries that these moves could herald the start of a wider trade war.
Changes at the top
After a week that saw rejection, election speculation and a very nervous bond market, Italy finally gets a government. The populist coalition between the Five Star Movement and League parties, with law professor Giuseppe Conte as prime minister, will take power later today after a compromise was reached over who would be finance minister. In Spain, Prime Minister Mariano Rajoy has lost a confidence vote, with Socialist leader Pedro Sanchez promised enough backing to take over. Bond markets in both countries are continuing their recovery this morning, with Spanish and Italian equities also rallying.
At 8:30 a.m. Eastern Time, payrolls data for May are released, with economists surveyed by Bloomberg expecting 190,000 new positions added in the month. With the unemployment rate expected to hold at 3.9 percent, focus is likely to remain on signs of labor-market tightness, especially wages. Average hourly earnings are forecast to continue posting modest growth of 2.6 percent year on year.
Overnight, the MSCI Asia Pacific Index was little changed while Japan’s Topix index closed 0.1 percent higher for its second day of gains as the yen weakened. In Europe, the Stoxx 600 Index was 1.1 percent higher at 5:45 a.m. as equity markets in Spain and Italy rallied and German stocks staged a recovery following yesterday’s selloff. S&P 500 futures pointed to a gain at the open, the 10-year Treasury yield was at 2.880 percent and gold was a little higher.
Huge data day
Jobs report aside, there is a lot else going on for eco-watchers today. Already this morning there was manufacturing PMI data in the Europe, which showed some weakening in national measures. Markit May manufacturing PMI for the U.S. is due at 9:45 a.m., with ISM manufacturing at 10:00 a.m. Auto-sales data for the U.S. comes out today, without General Motors, which has stopped publishing monthly numbers. At 1:00 p.m., the latest Baker Hughes rig count is released. The G-7 meeting of finance minister and central bankers continues in Canada today.