WEEK AHEAD:MAY 30

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Bear Market & NFP

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Number one:

Bear market rally? The S&P 500, considered by most to be the benchmark for US stock markets entered a bear market last week. The question for traders is whether a correction of 20% from the all-time high will be enough to entice buyers back in. Contrarians are looking at the weak sentiment as a reason to buy. Some of the reactions to earnings- for example the over 40 percent drop in the Snap share price-have been extreme. But the fundamental outlook for the US economy has soured significantly with many now expecting a technical recession. 

 

Number two:

Non-farm payrolls. It’s the first week of June, and as such the US jobs report is on Friday. The US dollar has sold off over the last week in what so far is just a rectracemnet in a major uptrend. Still, worries about the US economy are rising. With the Fed now raising the cost of borrowing and Americans paying a lot more for fuel and everything else, economists are beginning to look for signs of weakness in the labour market. With an unemployment rate of 3.6% and 428 thousand jobs created in April- it doesn't appear to be the case yet. 

 

Number three:

Bank of Canada rate decision. Another big rate rise is expected in Canada this week to combat runaway inflation in Canada. The hawkishness from the BOC coupled with rising oil prices have underpinned the loonie, which despite hitting a 1-year low, has held its own against the greenback, while other major currencies have been tumbling. More rate rises are expected after the meeting this week but it might not be straightforward. For what it's worth, former Bank of Canada governor Stephen Poloz is predicting stagflation.

 

Number four:

Memorial Day. It’s worth noting it could be a quiet start to the week with Americans away on holiday and Wall Street closed on Monday. Later in the week China also celebrates with the Dragon Boat festival holiday on Friday.

 

Number five:

Economic data. On Monday German CPI is expected to hit new highs for May. Japan releases a series of data points, including unemployment early Tuesday, which is followed by China PMIs and Eurozone inflation later. Australia GDP and US ISM manufacturing data are out on Wednesday. Thursday sees US ADP employment data released. Friday wraps up with PMI data from Europe and non-farm payrolls.