The first week of the month brings with it the monthly US jobs report. But, and it’s a big but as usual with payrolls as they have a capacity to surprise markets through history, the Fed is much more focused on inflation and the price stability part of its dual mandate. Last week saw central bankers sit on their hands, which may be the way for some time as they continue to try and dissect the relevant economic data to make medium-term policy decisions. How long do they look through rising oil driven price pressures? Interestingly, Powell specified that the majority of the FOMC did not want to send a signal that a hike would be equally likely as a cut. For what it’s worth, money markets currently see the world’s most important central bank unchanged through 2026.
Otherwise, FX price action has been moved recently by yen intervention, plus month-end flows and equity strength, with crude oil modestly softer through the end of last week despite ongoing US-Iran tensions. The US macro signal remains broadly resilient as stock markets hit fresh highs, though the prolonged energy shock certainly poses a risk to the above central bank reactions.
Regarding the current earnings season, this has reflected how huge and historic business investment in AI has powered economic growth and helped soothe investor nerves, as they look through the tenuous Middle East ceasefire. Around 82% of companies in the S&P 500 have beaten earnings estimates in the season up until now, above the 77% for the entire season a year ago, and 725 have beaten sales expectations. The season continues with Palantir, Advanced Micro Devices and Uber among the many firms reporting this week. Will they highlight the ongoing resilience of Corporate America in the face of war-fuelled price spikes and supply chain shocks?
Walt Disney and Block may face questions about their recently highly publicised layoffs around near-term restructuring and longer-term margin benefits, which could be applicable to wider business strategy. Palantir is set for another sales record but will likely highlight the huge reliance on US defence spending and slow additions of customers in the commercial space and outside of the US.