DAX Outlook: US Jobs Report and French Election Impact on Market Sentiment

2024-07-05 15:13:12

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DAX outlook: US jobs report looks strong – focus on French election

Investors are likely to have mixed feelings about the results of US labor market data (Non-Farm Payrolls). After dovish comments from Fed Chairman Jerome Powell at the beginning of the week, investors are still in the dark about the possible interest rate cuts in the US. Last but not least, stock market investors should turn their attention to the second round of the French election.

More jobs than expected – but the unemployment rate is rising

Last month, 206,000 new jobs were created outside of agriculture, more than economists had previously predicted (190,000). In return, the value from the previous month was revised down to 218,000 from 272,000 units. The unemployment rate rose surprisingly to 4.1 percent, after 4.0 percent in the previous month (expectation: 4.0 percent).
According to experts, a job increase of about 100,000 units is estimated to be enough to provide jobs for the growing US population.
The bottom line is that US labor market figures may not give a clear indication of a turnaround in interest rates. A persistent job market continues to provide powerful arguments for US monetary authorities to keep the key interest rate high for longer.
However, the reduction in wage dynamics could be seen as positive. Compared to the previous month, the average hourly wage increased by 0.3 percent, after 0.4 percent in May.

“Fed Watch Tool” signals a 71.8 percent probability of a September rate cut

Fed Chairman Jerome Powell had already said on Tuesday that the US central bank was in no rush to turn interest rates. At the central bank forum in Sintra, Portugal, he said the Fed was able to take its time and do it “right.”
The “Fed Watch Tool” from the CME Group now estimates that the probability of an interest rate cut at the upcoming September meeting (September 18) is 71.8 percent. A day ago this was 68.4 percent.

The second round of the French parliamentary elections will be on the agenda next Sunday. Marine Le Pen’s Rassemblement Nation (RN) party recently said it now wants to form a government even without a clear majority.