Stocks on guard for payrolls, Tesla tumbles as Trump-Musk bromance sours
A run of soft economic data this week has markets wary of a downside surprise in the monthly payrolls print due later in the day, which would add to fears of stagflation while piling pressure on the Federal Reserve to ease policy in a hurry.
Tesla shares bounced 0.8 per cent in after-hours trading after tumbling a whopping 14 per cent overnight to wipe off $150 billion in market value. That came after Trump threatened to cut off government contracts to Elon Musk's companies as the once close relationship turned into a bitter open disagreement.
There were signs that tempers may be cooling a bit, with Trump telling Politico that "it's okay" when asked about the relationship and that White House aides had scheduled a call on Friday with Musk to broker a peace.
Nasdaq futures rose 0.3 per cent and S&P 500 futures gained 0.4 per cent, while the losses in European stock futures narrowed, with EUROSTOXX 50 futures down just 0.1 per cent.
MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.2 per cent on Friday away from its eight-month peak. It is still set for a weekly rise of 2.1 per cent.
Chinese blue chips eased 0.2 per cent and Hong Kong's Hang Seng dropped 0.5 per cent as a call between Trump and Chinese President Xi Jinping offered little clarity to ease ongoing trade tensions.
"I think the fact that they are talking, the fact that there is a willingness to find a way through and the channels of communication are open is a positive," said Luke Yeaman, chief economist at the Commonwealth Bank of Australia.
"But I think it's clear that there are still a lot of tensions in the relationship and that neither side wants to give too much away… There's not a lot of goodwill to work with to fundamentally improve the trade relationship."
Most Asian shares are down slightly, but Japan's Nikkei is a rare bright spot in Asia, up 0.4 per cent, helping trim its weekly drop to 0.7 per cent.
WAIT FOR PAYROLLS
Weaker-than-expected labour market data, including a 47 per cent year-on-year jump in Challenger layoffs and a significant downside surprise in ADP's private payrolls, have dampened expectations for the payrolls report.
Forecasts are centred on a rise of 130,000 jobs in May, with the unemployment rate holding steady at 4.2 per cent.
Any unexpected weakness could bring the next U.S. rate cut forward and trigger a huge rally in Treasuries. Futures imply scant chances of a rate cut until September, which is about 93 per cent priced in, with another move likely to come in December.
Yields on the benchmark ten-year Treasuries were flat at 4.3887 per cent, having risen 3 basis points overnight to bounce away from a one-month low.
"We expect payrolls to lose additional momentum in May, printing a below-consensus 110,000," said analysts at TD Securities in a note to clients.
"Markets have recently been singularly focused on tariffs and deficits, with macro taking a back seat in recent weeks. Our forecast may not be sufficient to catalyze this revamped focus on macro, but we expect downside surprises to generate a larger market reaction."
The dollar was 0.2 per cent higher against its major peers on Friday just a touch above a six-week low as soft economic data dent the U.S. currency.
The euro hit a six-week top of $1.1495 overnight after the European Central Bank cut rates but signaled that it was nearing the end of its year-long policy easing cycle. Investors have given up on a move in July, with the final move most likely to come in October or December.
In commodities markets, oil prices were slightly lower but were headed for weekly gains on supply concerns. U.S. crude futures slipped 0.4 per cent to $63.12 a barrel but were up 3.8 per cent for the week.
In precious metals, gold prices climbed 0.4 per cent to $3,366.78 an ounce. For the week, they are up 2.3 per cent.
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