Suderman says: weaker jobs data offers some respite, but financial markets remain jittery

Jobs data and the inflation outlook are in focus, with financial markets hoping that today’s signs of weakness will lead the Fed more do be more dovish on interest rate rises. Labor market was weaker than expected, but all eyes are on tomorrow’s key non-farm payroll data – with markets in a jittery mood.

Markets relieved by weak jobs data, but only temporarily

• Stocks rallied mid-day following weak jobs data, but sold off close to 1% in afternoon trading
• The VIX, Wall Street’s fear index, rose close to 20
• The dollar rebounded from morning lows, though still squarely in the red as it trades near 105.25
• Treasury yields fell back, with 2- and 10-year yields hovering around 4.92% and 3.925% respectively – moving away from the psychologically important five- and four-point mark
• The WTI oil contract traded up to $78, but fell back to $76

Weaker jobs data ahead of Friday’s key non-farm payroll data

• US labor markets have been surprisingly resilient, leading the Fed to an aggressive interest rate path. There are now signs that labor markets are finally softening, helping quell wage inflation, the most nagging factors in our ongoing inflationary battle
• Initial US jobless claims came in at 211,000 for the week ending March 4, above last week’s 190,000, and the highest level since December
• Continuing claims rose above 1.7 million, up from last week’s 1.65 million, and the highest number in over year
• US employers made 78,000 job cuts in February, a drop from the 103,000 seen in January but still the largest cuts seen in the month of February since 2009
• The technology sector saw the largest cuts at 21,000, followed by the health care & products sector at 10,000. The tech sector has accounted for over a third of all job cuts announced this year

Dutch limit chip exports, US-China relations will suffer

• The Dutch government have restricted semiconductor technology exports to China, a move likely to strain US-China relations
• Back in October, the US government introduced large-scale restrictions on shipments of chipmaking tools to China, but needs cooperation from other major suppliers, such as the Netherlands, for these restrictions to truly be effective
• The all-important semiconductor industry has come into the spotlight in a big way these past few years, playing a very large part in driving tensions between the US and China over Taiwan, a major chip maker
• Chinese foreign ministry spokesperson Mao Ning said that China is "firmly opposed" to the move, saying that it limits normal economic and trade exchanges between Chinese and Dutch companies

Russia threatens Ukrainian nuclear plant

• Ukraine's Zaporizhzhia nuclear power plant was again forced off the grid early Thursday morning following fresh widespread Russian missile strikes
• The International Atomic Energy Agency (IAEA) has long expressed concerns about the potential for a disaster if more care is not taken, including adding a safe zone around the plant
• After this most recent outage, the sixth so far in the war, IAEA Director General Rafael Grossi warned that "each time we are rolling the dice" and urged action –expressing the seriousness of a meltdown at the largest nuclear power station in Europe

Paradoxically, the US benefits from cheaper Russian fertilizer

• The US imported a record level of Russian urea ammonium nitrate, a key liquid fertilizer, in January. Other US allies, such as Canada, have imposed tariffs on Russian product, making them uneconomical and thus driving their Russian imports to zero
• Meanwhile, the US has taken advantage of the displaced, cheaper Russian tons, ramping up imports significantly through late 2022 and early 2023

Analysis by Arlan Suderman, Chief Commodities Economist

Contact: Arlan.Suderman@StoneX.com