A Concerning Divergence in Bond Markets
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What’s in Today’s Report:
- What Is the Smart Market Telling Us? (Part II)
- JOLTS Data Takeaways – Normalizing or Rolling Over?
- Chart: JOLTS Fall Below Pre-Pandemic Trend Path
Futures are tracking European markets higher this morning on the back of “goldilocks” growth and inflation data overnight ahead of more key domestic economic data today.
Economically, China’s May Composite PMI handily beat estimates at 54.1 vs. (E) 52.7 which was a welcomed print as Chinese data has been underwhelming recently.
In Europe, the Eurozone Composite PMI rose to 52.2 vs. (E) 52.3 while April PPI fell -1.0% m/m vs. (E) -0.5%. Stabilizing growth numbers and evidence of further disinflation are exactly what the ECB want to see ahead of their first rate cut as it helps shore up the soft-landing argument.
Looking into today’s session, there are no Fed officials scheduled to speak but two important economic reports on the calendar. First, the May ADP Employment Report (E: 173K) will be released pre-market and second, the ISM Services Index (E: 50.7) is due out a half hour after the opening bell.
Investors will want to see a labor market print that is close to estimates. A number too strong will push back on the recent dovish money flows while a weak number will add to recession worries. With the ISM, a steady number above 50 with cooling price indices would be the best case scenario for risk assets leading into the jobs report Friday.
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