European markets head lower despite ISM PMI decline

• European equities in the red despite yesterday’s ISM manufacturing decline
• Oil prices continue to fall, as WTI hits $73
• JOLTS job openings expected to fall further

European indices are in the red, following on from a US session that once again saw the Dow underperform its peers as Nvidia bucked the wider trend to keep the likes of the Nasdaq and S&P 500 in positive territory. Notably, the weakness seen throughout European markets and much of the non-tech US stocks comes despite yesterday’s slump in the ISM manufacturing PMI which helped drive both the US dollar and treasury yields lower. While the prices paid element fell sharply to 57 (from 60.9), with the lack of any notable rebound for equities signalled the fact that the current inflation woes rest solely on the services sector which comes into focus when the ISM services PMI is released tomorrow.

The weakness evident within yesterday’s ISM manufacturing PMI did help drive crude oil lower once again, with WTI hitting $73 this morning. That represents a dramatic $7 decline after trading at $80 last Wednesday, as weak manufacturing growth tallied up with the easing Middle East concerns and the prospect of increased output from OPEC+ from October onwards. For markets the weakness seen in crude oil represents both cause for concern and grounds for optimism. After-all, oil price declines have long been associated with weak economic activity and demand, although the continued collapse in energy prices does help dampen inflation expectations going forward.

Looking ahead, the US jobs market comes into focus for the first time, in a week that will see it play an increasingly important role. Market forecasts point towards yet another decline in the JOLTS job openings figure today, with a three-year low of 8.37 million expected. It is worthwhile noting that this JOLTS report does highlight conditions in April, reducing its relevance for Friday’s jobs report. Nonetheless, with jobs openings expected to deteriorate alongside Friday’s payrolls figure, we could yet see further signs that the US economic growth trajectory is cooling.