【Market Preview One Week Ahead】This week focuses on geopolitical developments and U.S. non-farm payroll data. It is expected that the U.S. unemployment rate for March will remain at 4.4%. U.S. stocks will be closed on Friday for the holiday.

The situation in the Middle East is unstable. This week, the market will focus not only on the development of the fighting and the direction of oil prices but also on multiple U.S. employment data releases. On Friday (April 3), the U.S. will release March nonfarm payrolls and the unemployment rate. It is expected that March will add 60,000 jobs, reversing the weak momentum from February’s decline of 92,000 jobs, with the unemployment rate expected to stay at 4.4%. In addition, this week will also release March ADP employment changes and the number of layoffs announced by Challenger in March.

Also, Friday in the U.S. is Good Friday, and U.S. stocks will be closed for one day.

The probability of escalation in the Middle East is more than 50%

Oil prices have surged sharply. The Federal Reserve and European Central Bank’s monetary policy stance has swung quickly—from easing to becoming more tight—dragging global stock markets to continue weakening in recent days. Nouriel Roubini, who is known as the “Doctor Doom,” predicts that the probability of escalation has already exceeded 50%.

He said that the probability of escalation is more than half, and that the chances of escalation failing are less than the chances of escalation succeeding. The Iranian regime will fall, and the medium term will bring better results. But the continuation of the war will damage the global economy, and the international order will face enormous risks. He emphasized, “Even if the war ends tomorrow, oil prices will not return to pre-war levels.” However, he added that an oil price increase of 10% to 15% is not a catastrophic outcome.

He estimated that the European Central Bank and the Bank of England will likely raise rates in April or June, and the Fed could also find itself in a difficult position. “In 2022, the Fed nearly lost its credibility due to delayed rate hikes. Now the leadership is about to change. Kevin Warsh can’t ruin his own reputation at the beginning of his term, or they may raise rates under no choice.”

Anna Paulson, president of the Federal Reserve Bank of Philadelphia, said that because inflation has been high for many years, and rising commodity prices driven by the Middle East war will face the risk of quickly and persistently feeding into inflation, which will have a bigger impact on the U.S. economy. However, if the labor market cools down, it may curb the rise in inflation.

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