Bloomberg Daybreak Weekend: Tech Earnings, UK Elections, China PMI & US Jobs Report

US Jobs Report and Fed Policy

• 📊 The April jobs report is anticipated to show a slowing in hiring, though the exact numbers are uncertain due to company reactions to tariffs.
• ⚠️ Companies are reportedly making plans to lay off staff if tariffs begin to hurt their business prospects, but a significant fall-off is not expected.
• 📈 The unemployment rate is projected to remain stable at 4.2%, indicating a resilient labor market despite uncertainty.
• 💰 Federal Reserve Governor Chris Waller indicated that if unemployment starts to rise, the Fed will have to react, as tariffs are viewed as a tax that can slow hiring and increase prices.

Big Tech Earnings and Tariffs

• 💻 Major tech companies like Meta, Microsoft, Apple, and Amazon are facing scrutiny over their AI investments and the impact of US tariffs.
• 🌍 Over 50% of revenue for these companies comes from outside the US, making them vulnerable to tariffs and potential retaliation.
• 📉 Growth and profitability estimates for these tech giants are likely to be revised downwards due to tariff uncertainty and potential macro slowdowns affecting ad spending.
• 💡 Despite near-term challenges, AI is seen as a significant long-term growth driver, with hyperscalers reaffirming capital expenditure plans.
• 🚫 Regulatory pressures from the EU and US, including potential divestitures, are also a concern, though currently overshadowed by tariff issues.

UK Local Elections and Economic Outlook

• 🗳️ UK voters are heading to the polls for local elections, serving as the first real judgment on Prime Minister Keir Starmer's Labour government.
• 📉 The UK faces concerns about limited economic growth, with the IMF revising forecasts downwards more than for any other leading European country.
• 🌐 Uncertainty surrounding US tariffs adds to the economic challenges, with potential impacts on trade and supply chains.
• ⚖️ Bank of England rate setter Megan Greene noted both inflationary and disinflationary forces, including currency fluctuations and supply-side concerns, making monetary policy decisions complex.
• 📊 The political landscape shows Conservatives and Labour struggling for dominance, with potential breakthroughs for Reform UK and smaller parties.

China PMI Data and Economic Challenges

• 🇨🇳 China's official PMI data for April will be crucial, being the first reading since higher US tariffs took effect.
• 📉 Manufacturing PMI is expected to show noticeable damage and potentially drop into contraction territory due to tariffs, with some factories reportedly halting orders from US customers.
• 📈 The non-manufacturing sector is expected to continue expanding, showing a dichotomy in economic activity.
• 🌍 Companies are exploring supply chain diversification, but these trends are difficult to track through PMI data.
• 💡 While domestic demand is showing some improvement, it's unlikely to fully offset the external shock from reduced export demand due to tariffs.
• 📉 Bloomberg Economics has downgraded its China forecast to 2% for 2025, reflecting the impact of tariffs and external demand downturns.