Take Five: Plot twist

Reuters

4 days ago

LONDON, May 30 (Reuters) - U.S. jobs data, a European Central Bank meeting and big global oil producers all vie for investor attention in coming days.
And as a new month dawns, court rulings on U.S. President Donald Trump's tariffs suggest further plot twists to the trade story.
Here's what's coming up in the week ahead in world markets from Lewis Krauskopf in New York, Rae Wee in Singapore, and Yoruk Bahceli, Dhara Ranasinghe and Alex Lawler in London.
As ever-changing tariff developments muddy the growth outlook, the May U.S. jobs report will provide key insight into the state of the economy heading into another bout of trade turbulence.
Next Friday's report is expected to show the economy created 130,000 new jobs, according to a Reuters poll, down from a higher-than-expected 177,000 in April.
The data comes as Federal Reserve officials acknowledge they could face "difficult tradeoffs" in coming months with rising inflation alongside rising unemployment, minutes from their latest meeting show. Investors have reduced bets on the amount of expected Fed monetary policy easing, with fewer than two rate cuts now priced in by December.
They're also watching the progress of tax-and-spending legislation in Washington, with Trump ally Elon Musk arguing that the tax bill detracts from efforts to reduce the budget deficit.
A quarter-point ECB interest rate cut on June 5 that takes the key rate to 2% is a done deal for traders.
The question now is whether the ECB pauses after what will be an eighth rate reduction in the past year. Economists expect the ECB to hold steady come July before cutting once more before year-end.
The economy is holding up better than anticipated and pausing allows ECB chief Christine Lagarde time to assess the impact of U.S. tariffs.
Euro zone inflation data on Tuesday could show headline inflation hit the ECB's 2% target in May. Finally, expect Lagarde to be put on the spot about whether she's likely to complete her term after a press report that she held talks about leaving early to lead the World Economic Forum.
Eight OPEC+ members, in the process of gradually raising output, should meet online on Saturday to decide on an increase in oil production in July.
They may agree an output hike of 411,000 barrels per day, the same as in May and June, OPEC+ delegates tell Reuters. Others say the number is yet to be decided.
OPEC+ pumps about half the world's oil and has agreed three layers of output cuts since 2022 to support oil prices. Two of these are in place until end-2026, one is currently being unwound by the eight members.
The May and June hikes are faster than originally planned. The strategy of producers Saudi Arabia and Russia is partly to punish over-producing allies and win back market share. OPEC+ cites healthy market fundamentals as its reasoning.
Oil hit four-year lows in April below $60 after OPEC+ announced accelerating output hikes and as U.S. tariffs stoked growth worries. It has recovered to about $65 but is still down 13% for the year so far.
Upcoming inflation readings across emerging Asian economies could give investors further clarity on the extent policymakers in the region could go in cutting rates.
Central banks like Bank Indonesia have already resumed easing cycles recently and the market consensus is for more to come, as Trump's sweeping tariffs pose significant headwinds to growth in export-reliant Asia.
With inflation trending downwards and amid a recent surge in Asian currencies, policymakers have found greater comfort in lowering rates. The question now is by how much.
The Asian Development Bank expects growth in developing Asia will ease slightly in 2025 to its slowest pace since 2022.
Elsewhere, Australia releases first-quarter growth data on Wednesday. The numbers pre-date April's tariff chaos so any optimism from an upbeat number is likely to be short-lived.
Investors must be relieved to leave behind another roller-coaster month. But the back-and-forth in the courts on Trump's tariffs heightens uncertainty ahead.
Still, there's no stopping world stocks, which have long forgotten their "Liberation Day" losses. The S&P 500 index, up over 6% in May, is set for its best performance since November.
The picture is bleaker with focus on fiscal discipline, underscored by the U.S. losing its last top AAA rating.
U.S. 30-year Treasury yields are holding around 5% and led a recent global bond selloff, with Trump's sweeping tax and spending bill seen further raising the already-high U.S. budget deficit. The dollar has remained 4% lower since April 2 when Trump announced his tariffs.
Debt worries reverberate elsewhere. Japan, where longer-dated bond yields soared to record highs and the sale of such debt has seen tepid demand, remains in focus.