(Bloomberg) — U.S. index futures fell after a report that Tesla Inc. Chief Executive Officer Elon Musk said the electric carmaker needs to cut staff amid a gloomy economic outlook. Investors are also awaiting key US payrolls data that they will study for clues on the pace of Federal Reserve policy tightening.
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Tesla shares declined as much as 3.7% in New York premarket trading. Contracts on the Nasdaq 100, where Musk’s company is among the largest index components, were 0.5% lower. S&P 500 futures dropped 0.3%. Europe’s Stoxx 600 index edged higher, with consumer products and chemicals companies leading the modest advance. UK markets remain closed for holidays marking the Queen’s Jubilee, reducing trading volumes.
A Bloomberg gauge of the dollar steadied after overnight losses, while the yen held near the psychologically important 130 level against the greenback. Benchmark Treasury yields held at around 2.91%.
Investors remain on edge as some fear the pace of US monetary tightening could throw the world’s largest economy into a recession. Friday’s May labor report is likely to show the smallest gain in jobs since April 2021 alongside a down shift in average hourly earnings growth, Bloomberg Economics said.
“We really do just need a lot more data, not one data point, not just the jobs data,” Carol Schleif, BMO Family Office LLC deputy chief investment officer, said on Bloomberg TV. “The potential range of outcomes is wider than it has been. We do think that you are going to see a lot of volatility through the summer.”
The median forecast in a Bloomberg survey of economists is for the payrolls data to show a 320,000 gain after a 428,000 increase in April.
Tesla’s Musk said the electric carmaker needs to cut staff by around 10%, noting he had a “super bad feeling” about the economy, according to an internal email seen by Reuters.
“I think it’s very prudent by Tesla to reduce the staff,” Peter Garnry, head of equity strategy at Saxo Bank A/S, said in an interview with Bloomberg TV. “This market is not rewarding high revenue growth at all costs. You’re being rewarded from improvement in return on investor capital and free cash flow generation.”
Federal Reserve Vice Chair Lael Brainard said it was hard to see a case for a September pause in rate hikes and that increases of 50 basis points in June and July seemed reasonable.
“We believe a slight lean toward defensive sectors and away from the growth-oriented areas of this market still make sense,” said Scott Brown, technical market strategist at LPL Financial. “Outside of this recent rally, very little about this market has changed from a technical standpoint and that makes us wary of calling the all-clear.”
In Asia, stocks rose in Japan, Korea and Australia. Markets are shut in Hong Kong and China, where officials have vowed to carry out a slew of government policies to stimulate the economy. The offshore yuan rose amid thin trading in Asia.
Meanwhile, OPEC+ agreed to increase the size of its oil-supply hikes by about 50% in July and August, bending to pressure by major consumers including the US to fill the gap created by sanctions on Russian supplies. Oil futures pared overnight gains.
How will markets be affected by the Fed’s quantitative tightening? QT officially starts Wednesday and is the theme of this week’s MLIV Pulse survey. Click here to participate anonymously.
Here are some key events to watch this week:
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US May employment report Friday
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The UN’s Food and Agriculture Organization releases its monthly food price index at a time of maximum concern about global supplies on Friday
Some of the main moves in markets:
Stocks
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The Stoxx Europe 600 rose 0.2% as of 9:56 a.m. London time
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Futures on the S&P 500 fell 0.3%
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Futures on the Nasdaq 100 fell 0.5%
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Futures on the Dow Jones Industrial Average fell 0.2%
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The MSCI Asia Pacific Index rose 0.4%
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The MSCI Emerging Markets Index rose 0.3%
Currencies
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The Bloomberg Dollar Spot Index was little changed
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The euro was little changed at $1.0754
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The Japanese yen fell 0.1% to 129.98 per dollar
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The offshore yuan rose 0.3% to 6.6335 per dollar
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The British pound was little changed at $1.2575
Bonds
Commodities
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Brent crude fell 0.4% to $117.14 a barrel
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Spot gold fell 0.2% to $1,865.25 an ounce
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