Stock indices may return to growth if today’s US labor market data are weak

PayPal Holdings Inc (PYPL) lowered its forecast for annual revenue growth in anticipation of a broader economic downturn, causing the company’s shares down by 11% in extended trading Thursday. That forecast contrasts with big payments giants like Visa Inc (V) and American Express (AXP), which reported earnings growth and signaled an increase in US consumer spending despite high inflation and rising interest rates.

The US will release its monthly labor market data today. Analysts expect non-farm payrolls to come in at 197,000, down from 263,000 last month. Meanwhile, the unemployment rate will rise from 5.2% to 5.3%. If the data comes out worse than that forecast, the dollar index may fall sharply on the back of the fact that the US Federal Reserve will have to revise the pace of rate hikes downward. Conversely, strong labor market data will leave room for the US Fed to raise the dollar further.

The British pound fell sharply against the US dollar on Thursday after the UK Central Bank said it expects the country’s recession to last through 2023 and the first half of 2024. The Bank of England expectedly raised its rate by 75 BPS to 3.00%. This is the seventh rate hike this year and the highest cost of borrowing since November 2008. Most Committee members believe that if the economy continues to develop in line with the latest monetary policy report projections, further bank rate hikes may be needed to bring inflation back to the target level on a sustainable basis.

Germany is moving closer to recession as new data showed that factory orders in the key manufacturing sector fell by 4.0% over the last month. This is the sixth decline in seven months and the largest since March. A survey released earlier this week by the German Chamber of Commerce and Industry (DIHK) of 24,000 companies showed that 52% expect their situation to worsen over the next 12 months, and only 8% expect it to improve.

The Foreign Affairs Committee of the Czech Parliament declared the Russian regime terrorist. It is already the third country (after Estonia and Poland) to pass a corresponding resolution. It also became known yesterday that not a single UN country voted to admit Russia to the organization after the collapse of the USSR. This shows that Russia has been illegally represented in the UN since 1991.

West Texas Intermediate and Brent Crude Oil wiped out the success of the previous session. The Federal Reserve’s promise to raise rates for longer is a negative sign for oil traders.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 didn’t trade yesterday, Hong Kong’s Hang Seng (HK50) ended the day down 3.08%, and Australia’s S&P/ASX 200 (AU200) fell by 1.84%.

The Chinese government is forming a special committee to consider cutting its zero COVID policy. Chinese authorities have denied it, but rumors spread earlier on Friday that the policy will soon undergo significant changes.