North American News
US equities kick off June with big gains
- Broad gains as the Fed highlights a pivot
It was a great start to the month for North American equity markets:
- S&P 500 +40 points, or 0.96%, to 4230
- Nasdaq Comp +1.3%
- DJIA +0.5%
- Russell 2000 +1.1%
US construction spending for April 1.2% versus a 0.2% expected
- US construction spending for April 2023
- Prior month 0.3%
- Total construction spending in April 2023 was estimated at a seasonally adjusted annual rate of $1,908.4 billion, marking an increase of 1.2 percent from the revised March estimate of $1,885.0 billion.
- The spending figure for April 2023 was up by 7.2 percent from the estimate of April 2022, which stood at $1,780.9 billion.
- The total construction spending for the first four months of 2023 amounted to $566.7 billion, an increase of 6.1 percent from $533.9 billion during the same period in 2022.
US ADP May employment +278K vs +170K expected
- US May employment data from ADP
- Prior was +296K (revised to +291K)
Details:
- small (less than 50 employees) +116K vs +121K prior
- medium firms (500 – 499) +112K vs +122K prior
- large (greater than 499 employees) +106K vs +47K prior
- Job stayers 6.5% vs 6.7%
- Job changers 12.1% vs 13.2%
US May S&P Global final manufacturing PMI 48.4 vs 48.5 prelim
- The final May US manufacturing survey from S&P Global
- Prior was 50.2
- New export orders fell at a sharp pace that was the quickest in three years
- Input prices decreased at a modest pace midway through the second quarter, with firms recording a notable turnaround from the sharp uptick in costs seen in April
Citi predicts +200k for May NFP, maintains its call for Fed hikes in June and July
- The consensus for Friday’s report is +190K
The upcoming May employment report, to be released tomorrow, will be one of the final data releases that will influence market expectations for another potential rate hike on June 14, according to Citi. As the Federal Reserve enters a blackout period this Saturday, these labor statistics are particularly significant.
Citi predicts solid payroll growth of 200k, 0.3% increase in average hourly earnings, and a steady unemployment rate of 3.4%. These figures, if confirmed, would further assure Fed officials of the necessity for additional tightening in response to stronger economic activity and inflation.
Fed’s Harker: We’re close to the place where we can hold rates in place
- Comments from Harker
- Closely monitoring data to assess whether additional policy tightening will be needed
- Projects 2023 GDP growth below 1%, unemployment to rise to 4.4%
- Expects inflation to fall to around 3.5% this year and 2.5% next year, at 2% target in 2025
- Sees promising signs that Fed’s rate hikes are working
- Reports today from retailers show that consumers aren’t spending like they used to
- My preference, barring any change in data outside our forecast, is for skipping a rate hike
- It’s prudent policy to skip June
- Let’s skip and see how it goes
- If inflation started coming down unexpected fast, then we could cut rates; that is not my forecast
- I don’t think we’ll have a recession this year
Atlanta Fed GDPNow estimate for 2Q growth comes in at 2.0%
- Marginally higher than the May 26 level
The Atlanta Fed GDPNow model estimate for Q2 growth comes in at 2.0%. That is marginally higher than the May 26th estimate. In their own words:
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2023 is 2.0 percent on June 1, up from May 26 after rounding. After this morning’s construction spending release from the US Census Bureau and the Manufacturing ISM Report On Business from the Institute for Supply Management, an increase in the nowcast of second-quarter real gross private domestic investment growth from 5.9 percent to 7.9 percent was partially offset by a decrease in the nowcast of second-quarter real personal consumption expenditures growth from 2.3 percent to 1.8 percent.
ISM May manufacturing 46.9 vs 47.0 expected
- May US manufacturing data from ISM
- Prior was 47.1
Details:
- Manufacturing PMI 46.9 versus 47.1 last month
- prices paid 44.2 versus 52.0 estimate and 53.2 last month
- employment 51.4 versus 50.2 last month
- new orders 42.6 versus 45.7 last month
- production 51.1 versus 48.9 last month
- supply deliveries 43.5 versus 44.6 last month
- inventories 45.8 versus 46.3 last month
- customer inventories 51.4 versus 51.3 last month
- backlog of orders 37.5 versus 43.1 last month
- new export orders 50.0 versus 49.8 last month
- imports 47.3 versus 49.9 last month
US initial jobless claims 232K vs 235K estimate
- Weekly US initial jobless claims in continuing claims
- The initial jobless claims for the week ending May 27 were 232,000, an increase of 2,000 from the previous week’s revised level of 230,000.
- The 4-week moving average of initial jobless claims decreased by 2,500 to 229,500.
- The seasonally adjusted insured unemployment rate was 1.2% for the week ending May 20, unchanged from the previous week’s rate.
- The continuing claims during the week ending May 20 was 1,795,000, an increase of 6,000 from the previous week’s revised level of 1,789,000.
- The 4-week moving average of continuing claims was 1,797,500, a decrease of 1,500 from the previous week’s revised average of 1,799,000.
- The largest increases in initial claims for the week ending May 20 were in Texas (+2,808), Connecticut (+2,091), Iowa (+621), Pennsylvania (+540), and Missouri (+324),
- The largest decreases were in Massachusetts (-2,127), Michigan (-1,024), Illinois (-1,000), New York (-625), and Oregon (-565).
US Q1 unit labor costs 4.2% vs 6.0% expected
- Revisions to the Q1 productivity report
- Prelim was 6.3%
- Prior was +3.2%
- Productivity -2.1% vs -2.5% expected
- Prior productivity -2.7%
Dell announces earnings early. EPS $1.31 versus $0.85 expected
- Revenues $20.9 billion versus $20.1 billion estimate
Dell was expected to announce their earnings after the close.However the stock has been halted and the earnings have been released early.
- EPS came in at $1.31 versus $0.85 expected
- Revenues were at $20.9 billion versus $20.1 billion expected
Dell shares were trading at $45.33 up $0.52 or 1.16% before the stock was halted. It is now open and trading up $2.00 or 4.42% at $46.81
Commodities
Gold bulls eye key territories above ahead of NFP
- Gold price bulls are in the money but target higher still.
- All now depends on the NFP data on Friday.
Gold price was rising on Thursday and climbed from a low of $1,953.44 to score a high of $1,983.15 on the day. The US Dollar eased following passage of the US debt-ceiling agreement through the House on Wednesday.
US lawmakers appeared to avert a financial crisis with the news that US debt-ceiling agreement got through the House. The deal is to raise the debt ceiling for two years and this now moves onto the Senate, with passage expected well ahead of the June 5 deadline.
Due to a combination of factors, the US Dollar index fell to 103.52, the lowest for some time as fresh data and comments from some Fed officials raised bets the central bank will pause in June. Firstly, a slump in productivity was revised lower, while the ISM PMI showed the manufacturing sector contracted for a 7th month. Initial jobless claims and the ADP report beat forecasts but the data indicates a less tight labour market.
As for Federal Reserve speak, Fed´sGovernor Philip Jefferson and Philadelphia Fed President Patrick Harker suggested the central bank would skip a rate hike in the next meeting. This all comes ahead of the US Nonfarm Payrolls showdown on Friday. A strong outcome will likely reignite a US Dollar rally and weigh on the Gold price.
Overall, expectations are that the Federal Reserve might not hike interest rates when its policy committee meets later this month. The CME Fedwatch Tool showing a 75% probability the central bank will keep rates unchanged.
´´US payrolls likely slowed modestly in May, advancing at a still strong 200k+ pace for a second consecutive month. We also look for the Unemployment Rate to stay unchanged at a historical low of 3.4%, and for wage growth to print 0.3% MoM (4.4% YoY),´´ analysts at TD Securities said.
WTI crude all future settle at $70.10
- Up $2.01 or 2.95%
The price of WTI crude futures are settling at $70.10.That’s up to dollars $0.01 or 2.95%. The high price reached $71.05. The low price was a $67.54.
Today the inventory data showed:
- Crude oil build of 4.488 million versus an expected drawdown of -1.336 million
- Gasoline stocks showed a drawdown of – 207K versus -497K expected
OPEC+ unlikely to cut further
- Inventories due out today due to the US holiday
EIA weekly US oil inventories are due out today. They follow natural gas inventories (which were bearish) because of the US holiday on Monday.
WTI crude is currently up 20 cents to $68.32, which is a bit of a surprise because API inventories at the start of the day were negative for pricing.
EU News
European equity close: A strong start to June
- Broad gains, led by Italy
- Stoxx 600 +0.8%
- German DAX +1.2%
- UK FTSE 100 +0.7%
- French CAC 40 +0.6%
- Italy MIB +1.9%
- Spain IBEX +1.4%
Spain May manufacturing PMI 48.4 vs 47.8 expected
- Latest data released by HCOB – 1 June 2023
- Prior 49.0
Italy May manufacturing PMI 45.9 vs 45.6 expected
- Latest data released by HCOB – 1 June 2023
- Prior 46.8
France May final manufacturing PMI 45.7 vs 46.1 prelim
- Latest data released by HCOB – 1 June 2023
- Prior 45.6
Germany May final manufacturing PMI 43.2 vs 42.9 prelim
- Latest data released by HCOB – 1 June 2023
- Prior 44.5
Switzerland May manufacturing PMI 43.2 vs 44.5 expected
- Latest data released by Procure – 1 June 2023
- Prior 45.3
UK May final manufacturing PMI 47.1 vs 46.9 prelim
- Latest data released by S&P Global – 1 June 2023
- Prior 47.8
UK April mortgage approvals 48.69k vs 53.00k expected
- Latest data released by the BOE – 1 June 2023
- Prior 52.01k; revised to 51.49k
- Net consumer credit £1.6 billion vs £1.5 billion expected
- Prior £1.6 billion
ECB’s Lagarde: We need to continue with rate hikes
- Remarks by ECB president, Christine Lagarde
- We cannot say yet that we are satisfied with the inflation outlook
- Need to stick with rate hikes until we are sufficiently confident that inflation is on track to return to 2% target in a timely manner
- Inflation is too high and it is et to remain so for too long
- Rate hikes are already feeding forcefully into bank lending conditions
Eurozone April unemployment rate 6.5% vs 6.5% expected
- Latest data released by Eurostat – 1 June 2023
- Prior 6.5%; revised to 6.6%
Eurozone May preliminary CPI +6.1% vs +6.3% y/y expected
- Latest data released by Eurostat – 1 June 2023
- Prior +7.0%
- Core CPI +5.3% vs +5.5% y/y expected
- Prior +5.6%
Eurozone May final manufacturing PMI 44.8 vs 44.6 prelim
- Latest data released by HCOB – 1 June 2023
- Prior 45.8
Other News
Student debt relief is the next big political drama in the US
- Debt relief will be left up to the Supreme Court
The debt ceiling drama is winding down but US politics won’t stay out of financial markets for long.
Today, the US Senate voted on legislation to block the President’s student debt relief program.
The vote was 52-46 with moderate senators Joe Manchin of West Virginia and Jon Tester of Montana and independent Kyrsten Sinema of Arizona voting with Republicans. The White House has already pledged to veto it and the Senate won’t have the 60 votes to overrule him.
For the economy, roughly 43 million borrowers would get some relief and it would pay the full balance for 20 million.
Damn the UK Regulators: Microsoft looks for ways to close Activision deal
- Microsoft forcing the issue a bit
Microsoft is reportedly exploring ways to proceed with the $69 billion acquisition of Activision Blizzard, despite a veto on the deal by the UK regulators.
This course of action would likely lead to legal action from the UK’s Competition and Markets Authority (CMA).Potential options being considered include Activision pulling out of the UK or Microsoft proceeding with the acquisition and challenging the CMA in court.
Cryptocurrency News
Bitcoin price dives below $27,000 ahead of US Nonfarm Payrolls May report
- Bitcoin price opened June below $27,000 as market participants prepare for the release of US Nonfarm Payrolls May report.
- The consensus is that 190,000 jobs were likely added in May, against the above-expectations 253,000 in April.
- A strong jobs report on Friday could support the US Dollar and increase pressure on assets like Bitcoin and Ethereum.
Crypto market participants are closely watching the US Nonfarm Payrolls (NFP) report that is due to be released by the Bureau of Labour Statistics (BLS) on Friday. Market expectations anticipates 190,000 jobs were likely added in May.
The addition of payrolls has eased over the past few months, alongside a decline in wage growth.The market consensus for the unemployment rate is a slight increase from 3.4% to 3.5% in May.
Market expectations from the US Nonfarm Payrolls report
The NFP is considered an indicator that provides insight into the state of employment across the US. The effects of the Nonfarm Payrolls data tend to be limited to currency pairs involving the US Dollar.This implies there is an impact on cryptocurrencies like Bitcoin and Ethereum.
Hotter-than-expected job report supports the US Dollar Index and increases the selling pressure on risk assets like Bitcoin and Ethereum.This is likely to slow down the recovery of the two largest cryptocurrencies by market capitalization.
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