Global Market Report - June 1, 2018

Europe

Traders in Europe have now downgraded Italy’s political problems and upgraded the threat of a US-Europe trade war – tariffs on a number of key American products came into effect this morning.

Italy’s FTSE MIB rose nearly 3% on news of a newly formed government that doesn’t support Italy’s exit from the single currency. Italian bond yields reversed their sharp ascent earlier in the week amid relief that the country is not going to descend into a protracted summer crisis.

Spain took centre stage as Prime Minister Mariano Rajoy is facing defeat in a no-confidence vote.

Nevertheless, Spain’s Ibex index was one of the biggest risers in Europe today and bond yields drifted lower. Rajoy’s exit was perhaps seen as inevitable after a string of political scandals and markets anxieties are being calmed by a sense of relative unity among the ruling party’s rivals.

Sterling has attempted a recovery today against the dollar but this week the exchange rate has not managed to hold above 1.33. That could explain the FTSE 100’s relative resilience this week in the face of market volatility. A solid 50-point gain today puts the index within reach of recent record highs above 7,800 points. The apparent resolution of the Italian crisis has helped the mood too.

The UK's manufacturing PMI was better than expected, supporting the pound on Friday morning.

North America

All eyes will be on today’s non-farm payroll numbers: the US economy is expected to have added around 190,000 jobs in May, higher than the 164,000 in April. The unemployment rate is expected to have remained steady at 3.9%.

As it’s the start of the new month, global manufacturing surveys will be in view. Today the US will see the ISM Manufacturing survey, which is expected to show the sector in good health.

Earnings are light today, but the week’s retail theme continues with the release of earnings from Abercrombie (ANF).