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MARKETS

North American investors return from the long weekend holiday to a less-than-welcoming market, stepping into a seasonally gloomy tunnel with the year’s most crucial jobs report looming large. This report is set to draft the Fed’s policy script for 2024, and everyone’s hoping for a steady state affair with the numbers landing squarely in the Goldilocks zone.

With just under 100 bps of Federal Reserve easing on the table, spread over three meetings by year-end, this scenario is music to the equity market’s ears, especially with growth and earnings-holding firms. But when the bar is set this high, even a tiny downside miss could lead to a wave of disappointment.

I can’t stress enough how crucial the upcoming NFP report will be for the market. It is shaping up to be a significant litmus test. A stronger-than-expected payroll number, paired with a lower unemployment rate, could inject some much-needed confidence into the market, signalling that growth risks might be easing, at least for now. However, if the report disappoints—especially if it pushes the unemployment rate higher—we could quickly see growth concerns flare up again, potentially triggering a market correction reminiscent of last month’s dip.

The pressure is even more intense this time, thanks to a larger-than-expected negative revision to payroll data for the 12 months ending in March. This revision has only upped the ante, making it all the more critical for this jobs report to come in strong.

In China, the story remains as predictable as ever: the economy desperately needs a jolt of big-ticket fiscal stimulus aimed directly at households to kickstart spending. The lack of demand is glaring, and simply tinkering with the supply side of credit won't cut it.

OIL MARKETS

Crude oil prices are again struggling as the outlook for global demand turns increasingly bleak. The risks are skewed to the downside, particularly with China—the world’s second-largest consumer and a key driver of global oil demand growth—stuck in an economic funk. This softer demand is far from what OPEC+ had envisioned for 2024, and it throws a wrench into their plans to roll back production curbs, especially the additional voluntary cuts of 2.2 million barrels per day slated for the fall.

OPEC has been notably more optimistic about oil demand than other agencies, which may explain why they felt confident enough back in June to hint at ramping up production this October. However, the longer OPEC+ delays in clarifying its production strategy, the more anxious the oil market is likely to become about the potential for a global supply increase. This uncertainty could put even greater downward pressure on crude prices in the near term as the market grapples with the possibility of a supply-demand imbalance.

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