Stocks Rally and Dollar Fell Overnight

June 5, 2020

Even before the release of today’s U.S. jobs data, stock market participants accept that it will be likely very weak as part of horrific second-quarter growth, and investors are acting upon an expectation that recovery in the second half of 2020 and beyond will be sustained. But is this enough to explain the impressive continuing rally in share prices against a backdrop that includes street protests in cities around the country? Time will tell if other factors such as the possibility that the jobs data had been leaked ahead of their scheduled announcement.

Share prices rose 1.7% in Hong Kong, 1.6% in Singapore, 1.4% in South Korea, 0.9% in India and 0.7% in Japan, and they are up in Europe by 2.3% in Spain, 1.9% in France, 1.7% in Germany, 1.6% in Italy and 1.1% in Great Britain.

Just prior to the jobs report,U.S. stock futures were also higher, and the ten-year U.S. Treasury yield was up five basis points. 10-year German bund and British gilt yields meantime rose 3 bps.

The dollar shortly before the jobs data showed overnight losses of 0.9% against the kiwi, 0.8% versus the yuan, 0.7% relative to the Australian dollar and sterling, and 0.6% versus the loonie. The dollar was unchanged against the euro and up 0.2% relative to the Swiss franc and 0.1% vis-a-vis the yen.

Among commodity prices, WTI oil leaped 2.6%, while gold fell 1.1% overnight.

The U.S. jobs data just out are baffling to say the least. Just can’t recall a month when actual results deviated so far from analysts expectations. A 3.1 million rise in private sector employment was 10.6 million workers greater than projected. Overall jobs, which had been expected to drop 8 million, instead rose 2.5 million. Unemployment fell 1.4 percentage points to 13.3% instead of rising about 5 percentage points as forecast.

Canadian labor statistics also beat expectations by a wide margin, with the creation of 289.6k jobs instead of a drop of 5 million, a 13.7% unemployment rate versus 13.0% in April but below forecasts of 15%.

Data released around the world had not foretold such a recovery.

British consumer confidence fell another 3 index points to the lowest level since the first month of 2009. British house price inflation according to the Halifax index slid to a 6-month low in May.

Japanese real household spending sank 6.2% in May on top of April’s 4.0% monthly slide. The year-on-year drop of spending last month swelled to 11.1%. Separately, Japan’s index of leading economic indicators printed at a 133-month low of 76.2 in April, down from 75.1 in March and 91.5 in February. The index of coincident economic indicators also dropped steeply to a 138-month low.

German factory orders plunged 25.8% in April, depressing their on-year decreased from 15.4% in March to 36.6% in the subsequent month.

Italian retail sales plummeted 10.5% on month and 26.3% on year in April.

Spanish industrial production dropped 21.8% on month and 33.6% on year in April.

In comparisons to April 2019, industrial production in April 2020 plunged 61.4% in the Philippines, lost 9.9% in Greece and fell 36.8% in Hungary. Norwegian industrial production slid 0.8% on month in April, trimming the 12-month rate of increase by 2.2 percentage points to 5.4%.

Retail sales in Singapore sank 31.7% on month and 40.5% on year in April.  The Filipino jobless rate tripled from 5.3% in the first quarter of 2020 to 17.7% in the current quarter.

More disinflation emerged today in released price data. Austrian wholesale prices were 7.9% lower than a year earlier in May. Taiwan’s PPI and CPI indices posted year-on-year declines in May of 11.6% and 1.2%. Thai consumer and producer prices that month were 3.44% and 4.28% lower than a year earlier. CPI inflation of 2.1% in May was at a 6-month low.

The AIG-compiled Australian service-sector purchasing managers index rebounded just 4.5 index points to a 2-month high of 31.6 in May  and signaled a much greater rate of contraction than in the first quarter of 2020.

 Copyright 2020, Larry Greenberg. All rights reserved. No secondary distribution without express permission.


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