European markets follow US and Asian markets lower ahead of the jobs report

• European markets move lower after weak US ISM manufacturing PMI
• All eyes on the US jobs report
• Japanese stocks slump on yen resurgence

European markets are taking their lead from the US, with equities falling amid concerns around a potential burgeoning recession in the distance. Bad news for the economy appears to be bad news for markets, with US equities seeing sharp decline off the back of a worrying ISM manufacturing PMI survey yesterday. The faster pace of contraction in the manufacturing sector coupled with another push higher for US jobless claims does raise concerns that the restrictive actions taken by the Fed are finally rearing their ugly head. Understandably this puts a huge amount of emphasis on today’s jobs report, with any particular weakness likely to raise calls for a 50-basis point cut by the Fed in September. However, with the ISM survey pointing towards rising costs and contracting output, there is a fear that the Federal Reserve might be restricted if any economic weakness comes alongside continued inflation pressures. With that in mind, the market response to today’s payrolls and unemployment rate metrics look likely to be reliant on whether it comes alongside a rise or fall in average earnings.

Japanese stocks collapsed overnight, with the Nikkei 225 closing 5.8% lower amidst concerns around global growth and the direction of travel for the Japanese Yen. The Bank of Japan’s recent pivot has seen Governor Ueda push rates up to 0.25%, building on the recent move out of negative territory. With the bank feeling emboldened off the back of a rise in inflation and wage pressures, their efforts to strengthen the yen comes at a cost for companies that have long enjoyed the benefits of a weak Yen. Having closed out a month that saw the yen rise 7%, we have seen sharp declines for some of the top exporters, with manufacturing giants Toyota, Matsui, Fujitsu, and Mitsubishi some of the big underperformers over the past week.