U.S. equities witnessed a marginal upward trend on Wednesday as market participants grappled with a significant plunge in the growth of hiring within the private sector. This takes place against a backdrop of heightened tension following President Trump’s criticisms of Jerome Powell due to the released statistics. The ADP report conveyed that the growth in private-sector employments for May was a mere 37,000, a drastic shortfall from the predicted 114,000 by economists and also lesser than April’s 60,000 new job additions.
This signified the least extensive increase in private payroll numbers since March 2023. In response to the dismal numbers, Trump applied pressure on the Federal Reserve Chairman to enact a reduction in interest rates. Dispatching his sentiments via his platform, Truth Social, he proclaimed: ‘Powell, it’s ‘Too Late’ now but LOWER THE RATE. His actions are simply staggering!!! Europe has already enacted a recoil NINE TIMES!’
Simultaneously, for the first time since its last contraction in June, the U.S. services sector experienced a contraction. Based on the data from the services index by the Institute of Supply Management, the most recent readings for May sank into contraction territory with a disheartening score of 49.9. This borderline number positions just under the critical 50 point line, which differentiates between expansion and contraction, marking a worse outcome than initially anticipated.
Furthermore, not only did the FTSE 100 (^FTSE) and European shares gain ground on Wednesday, but also the news of the UK being temporarily exempted from Trump’s executive order, which proposed to double steel and aluminium tariffs to 50%, buoyed the market. Making a public statement, the U.S. President communicated his decision to give ‘different treatment’ to Britain following a successful trade negotiation between the U.S. and the UK earlier in the month.
However, escalating by 25% to a hefty 50% are the U.S. tariffs on steel and aluminium imports from other nations. For UK imports, the taxes will persist at the current 25%, but could surge to the projected 50% as of July 9th. This outcome hinges on whether the US administration deems the UK non-compliant with certain imperative aspects of their agreement.
The London index (^FTSE) was observing a modest uplift of 0.3% during the afternoon trading session. Concurrently, inspired by rumours of the German government contemplating the introduction of a tax-benefit package estimated at €46bn, Germany’s DAX (^GDAXI) noticed a 0.6% elevation.
The CAC (^FCHI) in Paris marched 0.7% upwards into a greener territory. The STOXX 600 (^STOXX) across Europe also gained 0.6% due to reports of economic growth within the Eurozone in May, according to the most recent PMI survey results.
Back in the U.S., following market opening, the S&P 500 (^GSPC) saw a hike by approximately 0.2%. The Dow Jones Industrial Average (^DJI) simultaneously displayed an increase a little over 0.1%. This followed the major indexes’ strong start to the week, reinforcing an overall positive trend.
Moreover, witnessing an upwards trajectory was the Nasdaq Composite (^IXIC), a tech-centric index, which increased beyond 0.2%. In the currency landscape, the UK pound sterling staged a near 0.5% climb against the U.S. dollar (GBPUSD=X), with an exchange rate of 1.3580 as of 15:51:34 BST.
The dynamics in the equity markets on Wednesday reflected myriad economic indicators and global political manoeuvres. Investors carefully watched the most recent employment numbers from the private sector, digesting the implications of a slower growth trajectory.
Comments from President Trump aimed directly at the Federal Reserve Chairman Powell have not gone unnoticed. His call for lower interest rates via his social platform heightens the tension between the administration and the Federal Reserve, marking a notable development in Trump’s economic stance.
European and UK markets have also been grappling with their corresponding geopolitical and economic currents. The temporary exemption of the UK from increased tariffs has introduced a new factor into the mix, one that may have profound implications on international trade dynamics.
The German government’s reported plan of launching sizeable tax breaks seems to have buoyed market spirits, offering a breakthrough during these chaotic times. Meanwhile, the eurozone’s encouraging economic growth in May also boosted investor confidence.
In conclusion, this was a day of slight growth tinged with caution, as global markets navigated through numerous economic and political waters. Investors remain watchful of any significant changes that could affect market highs and lows. Wednesday’s trading extends the recent trend of markets being steered by greater macroeconomic factors and geopolitical shifts.