Stocks in Europe and the US rallied (further) after yesterday's weaker than expected labor market data and now received an additional boost after the ADP private payrolls report seems to confirm a slowdown in the US labor market. An easing in the (still tight) US labor market, which has also kept wage inflation high, is an important precondition for the Fed to start cutting interest rates.
Data shows that hiring at US companies rose at the slowest pace since the start of the year in May. According to the ADP Research Institute, private sector hiring rose by 152,000 in May, compared to the median estimate of +175,000 and well below the downwardly revised 188,000 new jobs in April. The unemployment rate remained unchanged.
Yields stabilized in pre-market US trading after the recent sharp decline, but are now trending lower again. While the weaker US labor market data also points to a slowdown in the US economy, the positive impact on rate cut expectations currently outweighs concerns about an economic slowdown.
However, a sharp decline in the US purchasing managers' indices (the S&P report will be published today at 13:45 UTC+0 / the more important ISM report at 14:00 UTC+0) could lead to concerns about a slowdown in the US economy taking over again, which would also lead to slower growth in corporate profits.
The USD continues to face headwinds as expectations rise that economic conditions are approaching a level that would allow the Fed to pivot. The Bank of Canada could cut rates as early as today, making it the first G7 central bank to do so before the ECB is likely to begin easing monetary conditions tomorrow with a 25 basis point rate cut.
The hope of a rate cut has improved risk sentiment and brought equity prices back near record highs. We continue to see cautious optimism, which has also helped to stabilize commodity prices. The further decline in yields will continue to weigh on the USD and support USD/yield-sensitive investments such as gold, but also oil prices.
👁 ROB'S MARKET OVERVIEW:
June 05, 2024
🌐/🇺🇸 Global Markets ↗️/↕️
Cyclical / Luxury Stocks ↗️/↕️
Tech/Growth Stocks ↗️/↕️
Financial Stocks ➡️
Defensive Stocks ➡️/↗️
Energy Stocks ↗️/➡️ (trimming recent sharp losses)
Materials Stocks ↗️/➡️ (trimming recent sharp losses)
💱 Forex
AUD ↗️ (recovering after two days slide; benefiting from improved risk sentiment and higher Fed rate cut hopes)
EUR, GBP ↗️/➡️
USD ↗️/↕️/↘️ (rebound after yesterday's sharp slide; increased Fed rate cut expectations continue to weigh)
CAD ↗️/↕️/↘️ (CAD with headwinds if BoC cuts rate / or gives dovish outlook)
CHF ↘️/↗️
JPY ↘️/➡️
⚒ Commodity Markets ↗️/↕️
Oil prices ↗️/↕️ (rebounding after sell-off; benefiting from rate cut hopes)
Natural Gas prices ↗️/↕️
Metal prices ↕️
Gold ↗️/↕️ (benefiting from rate cut hopes and lower yields, still with resistance in the range $2,340 – $2,350)
⚡️Cryptos ↗️/↕️ (benefiting from rate cut hopes and lower yields; BTC open for further gains towards $73K)
(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)
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