The stock market is positive about weak US economic indicators. They may have second thoughts amid renewed fears of a global recession.
-
Stock market rejoices as weak US economic indicators increase probability of Fed rate cut
-
If the US economy’s resilience weakens, fears of a global recession will return.
-
China trade and inflation data highlights fragile global growth trajectory
Wall Street has been in a chipper mood since April’s weaker-than-expected U.S. labor market data gave new life to hopes of a Federal Reserve rate cut.
The report said the economy grew by just 175,000 jobs last month, less than analysts expected to add 243,000 jobs. The unemployment rate unexpectedly rose to 3.9%. Markets are currently pricing in 36 basis points (bp) of rate cuts this year, up from 23 basis points a week ago.
Should stocks rejoice amid weak US economic data?
The Institute for Supply Management’s (ISM) survey tracking the state of the U.S. services sector, released alongside the jobs report, revealed a shocking contraction in economic activity. The result marks the first failure to expand in the most influential region of the world’s largest economy since December 2022.
These somber results extend a series of disappointments with U.S. economic data since mid-April. The downturn that these results imply for the US economy would be most unwelcome for global growth.
Over the past 12 months, the North American giant has been an essential pillar amidst a downturn in other major economies.
S&P Global’s Purchasing Managers Index (PMI) data reveals that China is struggling to restart after a late exit from its coronavirus lockdown.
Meanwhile, the euro zone only returned to growth in March after a nine-month contraction in manufacturing and services sector activity.
Global recession risk: Is it time to worry?
Together with the United States, these three countries account for approximately 50% of the world’s gross domestic product (GDP). This underestimates their contribution to overall output, as much of the rest of the world is made up of vendor economies dependent on demand from the “big three.”
China’s volatile trade and inflation data released this week may highlight that China is not in a position to offset the US economic downturn. Trends in Europe have improved so far this year, but growth levels remain slow. Combined with the US and China, global economic growth slowed in April for the first time since October.
I don’t think this will help the stock market. With the threat of a global recession re-emerging in earnest, a moderately dovish shift in Fed policy expectations would be a painful victory. If the incoming news flow is this emphatic, last week’s increased risk appetite could quickly dissipate.
Ilya Spivak, TastyLive’s Head of Global Macro has 15 years of experience in trading strategies and specializes in identifying thematic movements in currencies, commodities, interest rates and stocks.he will host macro money and co-sponsor over time, Monday Thursday. @Ilyaspivak
For daily live programming, market news and commentaryvisit delicious live or YouTube channel delicious live (for option traders), and delicious live trends Stocks, Futures, Forex, Macro.
Trade with a better broker, Open a tasting trade account today. Tastylive, Inc. and Tastytrade, Inc. are separate but related companies.