Today's US Non-Farm Payrolls (NFP) is going to reflect the historically highest drop in employment figures, ranging from 18 million to 22 million lost jobs, according to estimates from most experts who were asked by Bloomberg and Reuters. However only one-tenth or so of this monstrous number could be accounted for by the fall in manufacturing payrolls, and the main loss of almost 90% of jobs happened to be, of course, from the private service sector, which suffered enormously during the quarantine period.
Broad expectations of this actual data dispersion are reasonably confirmed by the 4-week average jobless claims at 4.17 million on Thursday, up from 2.67 million in the beginning of April, and continuing claims jumping to 22.65 million from 18 million just a week before. Also, the employment component of non-manufacturing ISM fell to record low, while the similar labour component of manufacturing ISM fell to a 71-year low. The Automatic Data Processing (ADP) that is considered usually as a preliminary information collector reported on Wednesday that 20.24 million national jobs were lost. All of this would drive the U3 unemployment rate up to 16% or even higher than 20% as the estimates of experts differ substantially.
It's remarkable to note here that the last time the jobless rate was in the double digits was 37 years ago, just after the 1980s economic recession. Therefore, many people are wondering how the weighted average stock indexes continue to gain. If the US S&P500 stock index has not yet reached its April peaks, then another US Nasdaq index has already overcome the similar April levels this morning and even erased its losses for 2020 at the moment if it is calculated just from the beginning of the year and not from February's highs.
The cut of market cards, most likely, is as follows: most investors just don't care about the current super ugly condition of the economies and the labour market as they have long since swallowed this bitter pill. No matter how bad the unemployment figures are now they are already in prices. This applies to both stocks and currencies. The markets are counting on further step-by-step improvements in unemployment and other economic indicators as the economy re-opens in the US and Europe. And this has already been included in many asset prices.
As for the companies from the most affected sectors, investors may worry about whether their business will recover at all to the extent that could be at least close to the previous level, or even whether these particular companies will survive. But as for the rest of the companies and "normal" sectors, especially high-tech business models, stock indexes and the economy as a whole, the majority of the invest community have bought and continue to buy now the hope for a cloudless tomorrow's future. They don't care too much about the rainy and stormy situation of today. So, the employment figures in two or three months will really matter as they will show whether these hopes of the market crowd may become true. And if so, then to what extent. It is one thing if half of the currently registered unemployed people find their jobs again in the course of this summer, and another thing if three-quarters of them, for example, will become employed again.
That is exactly why investors are now focused on, on talks between the US and Chinese trade officials and on corporate forecasts, or on the Japanese fresh approval of Remdesivir from Gilead as a drug for the treatment of COVID-19 rather than the looming release of the data expected to show the worst US unemployment rate since the Second World War.
A reaction of stock indexes, gold futures or currencies on Forex to the US jobs report today could be rather characterised by instant volatility and technical charts logic. Most likely, the market instruments may be guided in their movements by the normal trading ranges and short tendencies that were established over the previous days since the beginning of May. And at least the first 15 or 30 minutes after the non-farm payrolls report is released, if not even an hour and a half of the market reaction on today's NFP would be used rather for the so-called repositioning. That means temporarily leaving the previous positions in a couple of minutes with favourable prices turn up, and then trying to re-open the same kind of positions at more comfortable technical levels, or at a time when the charts are technically unloaded and new negative price movements against the position become less likely.
There are four important groups of investors who share relatively similar interests in the market at each particular instrument:
The above-mentioned groups of market participants and their positions can embody both medium-term and very short-term ideas. This kind of simple considerations about the likely behaviour of the four main market groups of interest is reasonable to be assumed especially for the traders who are going to build an effective speculative trading strategy directly on the post-report reaction.
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