KOLAWOLE OMOLOJU compiles the summary of global market outlook this week for Financial Street. There may be surprises along the way following Automatic Data Processing’s better-than-expected numbers experienced on Wednesday.
Oil prices also seem to see a complete breakthrough from the downtrend as Brent oil futures are back above $41 after reports of a breakthrough in talks with over-producers. At the other side, the bond spreads are being driven down while stocks are up, courtesy of European Central Bank’s latest booster shot of stimulus.
Now in details, here’s what you need to know in the global financial markets on Friday, June 5.
U.S. job losses go south
This week saw its third of updates from the United States labour market, with the publication of the Labor Department’s monthly report. From the information from Nonfarm payrolls, about eight million people lost their jobs in the month to mid-May. That is fair compared to the 20.5m seen in April. That points to immeasurable hardship brought about by the pandemic across the country. The jobless rate is expected to rise to a post-war high of 19.7 per cent.
The risk is for an upside surprise – ADP’s assessment of private payrolls on Wednesday suggested a much gentler decline of barely two million. However, the latest instalment of weekly jobless claims on Thursday was a reminder that the trend was turning more slowly than politicians – and stock markets – would like to believe.
ECB forces Euro, Stoxx to hit three-month highs
The massive rebound experienced by the U.S. stocks earlier this week extended its merciful hands to Europe. European assets are enjoying their moment in the sun, after the ECB padded its emergency bond-buying fund by another €600bn (about $680bn) at its meeting on Thursday.
The euro earlier hit $1.1384, its highest level against the dollar since March 10, but is consolidating now after rallying for 10 days straight since the European Commission announced its own 750bn programme aimed at helping the EU economy recover next year.
Sovereign yield spreads have tightened to their narrowest since March in the wake of the dual initiative by Brussels and Frankfurt, something that is allowing chronically beaten-down bank stocks to lead the current rally.
Earlier Thursday, the German Bundesbank said the stimulus package announced by Berlin on Wednesday would soften the economy’s contraction this year by over one per cent of Gross Domestic Product. It still expects a decline of over seven per cent for 2020, while the ECB sees the euro zone shrinking by 8.7 per cent.
OPEC, Russia agree supply cut extension
Crude oil prices jumped again as the so-called OPEC+ group of producers agreed in principle to extend the current level of output restraint by one month, that is, until the end of July.
The group will meet virtually on Saturday to rubber-stamp the agreement, which came after Iraq and Nigeria agreed to improve their compliance with the deal agreed in April at the depths of the collapse in global demand.
By 6.30a.m. ET, U.S. crude futures were up 2.2 per cent at $38.24 a barrel, while the global benchmark Brent was up 3.0 per cent at $41.20 a barrel, the first time it’s been above $41 since March 7.
U.S. stocks set to open higher on oil news
U.S. stock markets are set to open higher, having turned positive on the back of the news coming out of Organisation of the Petroleum Exporting Countries. That would cap a remarkably resilient week for stocks, which are now close to recovering pre-pandemic levels as stimulus money continues to find its way into financial assets.
By 6.30a.m. (1030 GMT), the Dow Jones 30 futures contract was up 283 points (1.1 per cent) while the S&P 500 futures contract was up 0.7 per cent and the Nasdaq 100 futures contract was up 0.3 per cent.
The dollar index, by contrast, appeared to be bottoming out around 96.8 after losing 1.8 per cent over the course of the week, while gold futures were down 1.1 per cent at $1,708.30 a troy ounce.
Slack, Broadcom question tech valuations
A note of caution could be seen in tech stocks Friday morning after two disappointing updates from prominent names after the bell on Thursday.
Chipmaker, Broadcom, warned that it expected the next couple of quarters to be overshadowed by supply chain constraints and a “substantial reset in wireless”, also hinting that it expects the launch of the next generation of iPhones (for which it makes chips) to be delayed.
Separately, messaging service, Slack, said it had failed to register any acceleration in revenue growth in the last three months, despite perceptions that it was well positioned to profit from the boom in remote working. Slack’s figures stood in sharp contrast with those released by Zoom Video earlier in the week.
In a lighter vein, Tesla founder, Elon Musk, called for Amazon.com to be broken up after it restricted distribution of a book on the COVID-19.