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The US Jobs Report on Friday showed mixed outcomes. However, there are clear signs that weakness is starting to be felt in some sectors, including the Manufacturing and Private sectors. Manufacturing lost more jobs for the 2nd month in a row, one we have not seen since Covid, while the Private Sector showed the weakest number of new jobs in two years.

The rest of the data was almost in line with the market estimates. YoY wages continue to slow down, showing no inflation pressure, while the unemployment rate ticked lower.

The market reaction was limited as the US markets were closed in observance of Good Friday. Therefore, we expect a notable move on Monday. Since there is no inflation pressure from wages, while the NFP is still strong, a 25bps rate hike by the Federal Reserve is back on the table. Yet, more evidence is needed, which could be confirmed or denied later this week.

What To Watch This Week

It’s all about the US once again as we wait for a series of key economic releases, which starts with some Fed members’ speeches on Tuesday, including Harker and Kashkari.

On Wednesday, all eyes will be focused on the inflation data. The CPI YoY is expected to slow down towards 5.2% down from 6.0%, which would be the lowest since Sept 2021. However, the Core CPI is expected to tick higher again to 5.6% up from 5.5%, which would keep the possibility of another rate hike by the Fed on the table, while the best-case scenario for indices would be a surprise decline below 5.5%.

On Thursday, Eyes will be on the US PPI, which is expected to slow down to 3.1% from 4.6%, while the YoY Core CPI may slow down further towards 3.3% down from 4.4%. That would be another bullish factor for the US indices, especially if it comes with a weaker outcome.

Finally, on Friday, we will be watching the Retail Sales data, which is expected to show more weakness. Retail Sales may decline by -0.5% vs. -0.4%, which would be the 2nd monthly decline in a row. Core Retail Sales are also expected to decline by -0.4%, which would be the biggest decline in three months.

Geopolitical Tensions

Over the past few days, geopolitical tensions are on the rise, whether in Asia or Europe. It looks like the cold war has already started. China’s military drills around Taiwan could be serious if they escalate in the coming days, as the US won’t stay on the sidelines.

On the other hand, Russia and the US exchanged accusations over the weekend about Ukraine, while the US upbeat their tone, warning Russia not to misunderstand the US intentions and to underestimate the US response.

Despite the tensions, it looks like the market is not worried yet. However, any escalation in the coming days may turn the table upside down. Therefore, it would be wise to trim our risk until further notice.

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