19 June 2020

Dow Slips Despite the Decline in Jobless Claims

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News shaping
the markets today

     

What’s happening: The Dow Jones index closed lower on Thursday after investors digested weekly data on the US labour market.

What happened: The US Labor Department reported yesterday that around 1.5 million people had applied for unemployment benefits in the latest week.

Jobless claims dropped for the tenth straight week in the seven days ending June 13. Despite this, investors focused on the numbers coming in higher than the consensus view and a deceleration in the pace of decline last week.

Markets also fretted over rising infections and hospitalisations in various US states. The Dow Jones index declined for the second consecutive session, although the other major indices recorded some gains in trading on Thursday.

Why it matters: With 1.5 million new applications for jobless claims in the most recent week, the total number of claims in the US have climbed past 48 million during the pandemic. Continuing claims came in at 20.54 million, versus the previous reading of 20.61 million.

While the Labor Department’s report was in focus yesterday, other data from the US showed signs of the economy improving. The Philadelphia Fed manufacturing index spiked to 27.5 in June, rebounding from -43.1 in the previous month. The figure was significantly better than the expectations of a negative 20 reading.

Fears were also fanned by news of rising cases in the US, with Texas, Arizona and Florida reporting high new infections. Florida confirmed over 2,600 new cases, while Arizona reported more than 1,800. Despite this, several local governments are continuing with their reopening plans.

After losing 170 points on Wednesday, the Dow Jones index shed another 39.51 points to close at 26,080.10 on Thursday, with shares of Goldman Sachs and American Express declining. The S&P 500 and Nasdaq 100 held up, with gains of 1.85 points and 32.52 points, respectively, driven by energy and consumer staples shares.

The 10-year Treasury note yield declined 2.6 basis points at 0.707% on Thursday. August gold slipped 0.3% to finish at $1,731.10 an ounce, while US crude gained 2.3% to reach $38.84 per barrel in the previous session.

What to watch: Markets await the US current account report and speeches from various Federal Reserve members. The current account deficit, which contracted by $15.6 billion to $109.8 billion in the fourth quarter, is expected to shrink further to $103 billion in the first quarter.

Investors continue to assess the coronavirus numbers, with total cases surging close to 8.5 million globally. The US has so far reported more than 2,191,050 cases and around 118,430 deaths.

The Markets Today

     

The Canadian dollar will be in focus today, ahead of retail sales data scheduled to be released later in the day.

Context: The Canadian dollar slipped against the greenback on Thursday on disappointing domestic data showing a strong decline in wholesale trade. Traders also remained worried about increasing coronavirus infections.

Details: Statistics Canada reported a 21.6% decline in wholesale trade in April due to coronavirus-led shutdowns across the country.

Payroll services provider ADP said that Canada had added 208,400 jobs last month, which is when lockdown restrictions began easing in the country. However, April’s report was revised downward to 2,361,714 job losses.

Crude oil, one of Canada’s major exports, gained after the Joint Ministerial Monitoring Committee of the OPEC (Organization of the Petroleum Exporting Countries) and its allies met yesterday to review production cuts. WTI crude oil futures climbed 2.3% to settle at $38.84 per barrel.

Canada’s government bond yields fell on Thursday, with the 10-year yield down 1.8 basis points to 0.523%.

After declining to a two-week low of 1.3685 against the US dollar on Monday, the loonie remained range bound between 1.3521 and 1.3616 yesterday. The USD/CAD forex pair ended the day down 0.3% at 1.3608.

What to watch: Traders await Canada’s retail sales data, which dipped 10% in March and is expected to decline another 15.1% in April. The USD/CAD traded down 0.11% to 1.3585 in the European session.

Investors continue to monitor coronavirus cases around the world. Canada has so far reported 101,870 cases with around 8,360 deaths.

Other Markets: European indices were trading higher at 8:30am GMT, with the FTSE 100, French 40 and Dax 30 index up by 0.4%, 0.6% and 0.5%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

UAE’s inflation rate and US Baker Hughes crude oil rigs.

 

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