Monday, June 8, 2020

Asia Times: S&P500 spikes up 2.62% after the US economy unexpectedly added jobs in May

Tags
  • Dollar
  • Gold
  • Yen
  • Stocks
  • NonFarm Payrolls
  • Oil

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Market Recap: S&P500 spikes up 2.62% after the US economy unexpectedly added jobs in May

Stocks in the US surged last Friday after payrolls in the US for May unexpectedly improved from April. Data from the US Bureau of Labour Statistics (BLS) showed NonFarm payrolls increasing by 2.509 million in May, much better than economists’ estimates for a 6.750 million drop. The BLS' unemployment rate statistic was also lower than any of Bloomberg surveyed economists, falling to 13.3% in May from 14.7% in April. The better-than-expected labour market data helped fuel investors' optimism for a faster-than-expected economic recovery, sending some stocks like Apple to new record highs. The dip in unemployment highlighted the benefits of easing lockdown restrictions as people were likely called back to work with businesses allowed to open since the start of May. However, an unemployment rate of 13.3% is still almost three percentage points higher than peak unemployment during the Great Depression.

Energy, financial and industrials stocks surged the most among S&P500 sectors on Friday, as an economic recovery strongly drove investor sentiment. Growing number of protests in the US that has spilled over into multiple countries in the UK and Europe posed some downside risk in the form of additional strains on the current business environment and increased likelihood of a new spike in Covid-19 infections, although these concerns were likely dismissed by the market.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +3.15% +829.16 27,110.98
S&P500 +2.62% +81.58 3,193.93
Nasdaq +2.06% +198.27 9,814.08
*Source: Bloomberg

Major indices across the world also ended the week strongly. The Euro Stoxx and German Dax rose more than 10% over the week, helped in part by strong sentiment for a faster-than-expected economic recovery in the US and as Germany announced its fiscal stimulus program. The weekly gain in US indices pushed the S&P500 closer to positive year-to-date returns. Most Asian indices outperformed the S&P500, despite markets in Asia closing before the release of the BLS' labour market data. This implies that markets in Asia may track gains in the US on Monday’s open as well.

Indexes Weekly Change (%) Net Change Closing Price
Dow Jones +6.81% +1,727.87 27,110.98
S&P500 +4.91% +149.62 3,193.93
Nasdaq +3.42% +324.21 9,814.08
FTSE100 +6.71% +407.70 6,484.30
Euro Stoxx +10.95% +334.09 3,384.29
CSI300 +3.47% +134.23 4,001.25
Nikkei +4.51% +985.84 22,863.73
KOSPI +7.50% +152.27 2,181.87
ASX200 +4.22% +243.03 5,998.72
Hang Seng +7.88% +1,808.94 24,770.41
Straits Times +9.59% +240.75 2,751.50
*Source: Bloomberg

The New Zealand dollar rose the most, as commodity-related currencies led gains in the foreign currency market. The dollar was mixed on Friday, after the surprise in the labour market data in the US sent the greenback higher against the euro as the prospects for an economic recovery in the US improved over that of the EU in the short-term. Traditionally lower-risk currencies fell the most, with the Swiss franc and Japanese yen both among the losers against the dollar on Friday. The dollar index managed to eke out a 0.27% gain on Friday as a result, but it wasn't enough to keep the index from falling over the week. DXY had suffered its third week of losses as of Friday, losing almost all of its gains since the start of the year. There may be more room for the dollar to fall later this week as Fed officials meet for monetary policy, which is likely to result in little change to its policy tools.

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Safe haven assets fell on fading risk aversion on Friday. Gold fell more than 1% on Friday to end the week 2.61% lower from the previous week. The Japanese yen weakened against the dollar as well. US Treasuries fell across the board, pushing 10-year yields 7.2bps higher to 0.90%, inching closer to 1.00%.

Safe Haven Assets Daily Change (bps) Net Change Closing Price
Gold -1.69% -28.95 1,685.06
Silver -1.67% -0.30 17.23
JPY -0.40% -0.44 109.59
*Source: Bloomberg
US Treasury yields Daily Change (%) Yield (%)
2-Year +1.2 0.21%
10-Year +7.2 0.90%
30-Year +3.4 1.67%
*Source: Bloomberg

Oil surged on Friday, mostly thanks to a report from Bloomberg hinting at a likely OPEC+ agreement to extend the current level of production cuts. Both WTI and Brent crude oil futures rose more than 5% on Friday as a result. Oil futures is likely to get another boost in today's trading after OPEC+ confirmed Bloomberg's report over the weekend, agreeing to a one-month extension of record oil output limits. OPEC+ members on Saturday signed a new agreement for a production cut of 9.6 million barrels per day, a slight reduction of 100,000 barrels a day from June. An additional detail to the agreement was added as well, stating that members who were unable to meet its production limit in May and June will be required to make extra reductions from July to September to compensate, a signal that OPEC+ leaders were clamping down on compliance within the bloc. Oil prices, as well as US shale oil producers' stock are likely to get a boost on the announcement on Monday as a result. Both Brent and WTI crude oil futures were trading more than 1% higher on Monday morning as of 8.32am (GMT +8). The clampdown on compliance within the bloc may imply increasing risk to the OPEC+ agreement in the longer-term however, as inability to comply may have more impact on the current agreement than before.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +5.78% +2.31 42.30
WTI Crude +5.72% +2.14 39.55
*Source: Bloomberg

In Asia, stocks were climbing higher on Monday morning, likely tracking gains in the US as sentiment continues to improve. The Nikkei and KOSPI were both trading higher in the first hour of the trading day, signalling that Asian markets are likely to continue to see gains today. The Australian stock exchange will be closed for the Queen's holiday and will only reopen on Tuesday. Futures tracking major indices were trading higher as of 8.38am (GMT +8) as well.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.10% +251.35 23,115.08 8:49:35 AM
KOSPI Index +0.24% +5.22 2,187.09 9:09:30 AM
*Source: Bloomberg
US Futures Daily Change (%) Net Change Last Price As of (GMT +8)
Dow Futures +0.70% +190.00 27,148.00 8:38:05 AM
S&P500 Futures +0.63% +20.00 3,196.75 8:38:12 AM
Nasdaq Futures +0.58% +56.50 9,852.25 8:38:12 AM
*Source: Bloomberg

Economic releases for the day ahead include (all timings in GMT +8):

  • Germany Apr Industrial Production (2pm)