Bloomberg Daybreak Weekend: Tech Earnings, UK Elections, China PMI & Tariffs

US Jobs Report and Fed Policy

• 📉 The April jobs report is expected to show a slowing in hiring, but the overall number remains uncertain due to company reactions to tariffs.
• ⚠️ Companies are hesitant to lay off staff but are making plans to do so if tariffs negatively impact business prospects, suggesting a potential ratcheting down rather than a sharp fall.
• 📊 The unemployment rate is expected to remain stable at 4.2%, indicating a resilient labor market despite growing uncertainty.
• 🏦 Federal Reserve officials are monitoring the situation and will react if unemployment starts to rise, as tariffs are seen as a tax that could slow hiring and increase prices.

Big Tech Earnings and Tariff Impact

• 📱 Major tech companies like Meta, Microsoft, Apple, and Amazon face uncertainty from US tariffs, as over 50% of their revenue comes from outside the US.
• 🌐 While digital services are less directly impacted by tariffs, a pullback in ad spending from large Chinese advertisers could affect growth rates.
• 💡 Despite near-term challenges, companies remain bullish on AI investment, with some reaffirming capital expenditure plans, indicating a belief in AI's long-term revenue growth potential.
• ⚖️ Regulatory pressures, particularly in the US with pending cases against Google and Meta, are a significant overhang, though currently overshadowed by tariff concerns.

UK Local Elections and Economic Outlook

• 🗳️ UK voters are heading to the polls for local elections, with the Labour Party's performance under scrutiny amid concerns about limited economic growth.
• 📉 The IMF has significantly revised down UK growth forecasts, citing increasing uncertainty from US tariffs and a potential impact on trade and supply chains.
• 🏦 Bank of England rate setters acknowledge both inflationary and disinflationary forces, with a particular concern about the supply side impacting inflation.
• ⚖️ Currency fluctuations, including the pound's recent strength, add to the uncertainty surrounding inflation and financial conditions.

China PMI Data and Trade War

• 🇨🇳 China's official PMI data for April will be crucial for assessing the impact of elevated US tariffs, with potential for a noticeable drop in manufacturing activity.
• 📉 Manufacturing PMI is projected to fall into contractionary territory, while the non-manufacturing sector is expected to continue expanding.
• 🏭 Chinese factories are reportedly not taking new US orders or have stopped production, indicating a direct impact from tariffs, though data lags exist.
• 🌍 Efforts to diversify supply chains are underway, but tracking these shifts through PMI data is challenging.
• 📈 While domestic demand shows some improvement, it's unlikely to fully offset the shock from reduced external demand due to tariffs.
• 🗣️ China maintains a tough stance in trade negotiations, signaling a willingness to endure a long standoff with the US, though its economy will suffer.