European markets have opened modestly higher ahead of this afternoons US payrolls report. This week’s market reaction to Fed chair Jay Powell’s less than dovish press conference appears to suggest that investors weren’t positioned in a way that reflected what they perceived the FOMC might say about a future rate path.

The reaction to Powell’s comments suggest that markets may have been listening too much to the background noise of the politics of rate cuts as espoused by President Trump’s chief economic advisor Larry Kudlow, as well as President Trump himself. The reality is that when looking at the data the idea that rates might be cut by year end was clearly overpriced, and Powell simply reminded investors of that fact.

Today’s payrolls numbers will give an additional steer on that, but the idea that you can start pricing for a 50 basis point rate cut when ADP payrolls come in at 275k and wages are rising at an over 3% clip, is patently absurd.

On the earnings front HSBC has reinforced its position as the UK’s biggest and most profitable bank, after reporting that quarterly profits after tax jumped by 31% to $4.9bn, with revenues up by 5.2% at $14.4bn, from $12.7bn a year ago.

The shares have risen in early trading however the focus is set to remain on cutting costs after total operating expenses rose by 3.2% and net interest margin fell sharply to 1.59% from 1.67%.

In this regard it is perhaps fortunate that HSBC has such a diverse geographical presence unlike Societe Generale whose woes continued today after reporting that profits fell 26% in the first quarter. The bank has already warned this year that jobs are set to go due to poor performance in its trading operations and these numbers underline this weakness. Revenues came in at €6.2bn while income fell from €850m to €631m, as negative interest rates and low volatility ate into its ability to generate profits. 

The uncertainty in commercial real estate and retail sector has seen Intu Properties warn that rental income is likely to fall between 4 and 6%, As the woes of Debenhams and House of Fraser can testify the option of closing stores or looking to negotiate lower rents to offset lower footfall is a fine one, and something that Intu appears to have woken up to. This is an eminently sensible approach given that negotiating lower rents at least offers some sort of return as opposed to a zero return if the retailer closes the store completely.

Holiday Inn owner Intercontinental Hotels shares have slid after reporting that occupancy rates slowed in Q1, particularly in its core US market. Expansion in China continued apace as it looks to expand in Asia markets, while revenues per room in Europe remained under pressure, with France in particularly hit due to the unrest caused by the yellow vest protests a likely factor.

The US dollar has continued its gains over the last three days ahead of this afternoons US payrolls numbers, and could well return to the highs of last week, if wages growth remains strong, and we get a good headline number.

The pound is stable ahead of the latest services PMI numbers for April which are expected to recover from the slowdown seen in March, when they hit their 48.9 and their lowest levels since the June 2016 Brexit referendum.

US markets look set to open modestly higher after last night’s sell-off saw stocks hit a one week low.

Beyond Meat will also be in focus after soaring on its IPO debut yesterday, surging from $25 to close at $65.75 after the first day of trading, giving it a market cap of $3.8bn.

The company, which is backed by Microsoft founder Bill Gates as well as Leonardo Di Caprio is a vegan burger maker, who specialise in plant based food products, using proteins from peas, fava beans and soy and has, as yet, not made a profit.  Last year the company made a loss of $29.9m on net revenues of $87.9m. 

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