“Blind” non-agricultural report last week to the market recovery trading again into a needle cardiotonic, U.S. stocks traded above record highs, on Monday (June 8) market risk trading, gold continues to decline, risk currencies continue to lift, weekend OPEC + extended cuts to crude oil price rally opening, WTI crude oil through the $40 mark. In the current session, markets are focused on remarks by European Central Bank President Christine Lagarde.
Be blind! Market riot unceasingly, just gold dives again
With recovery trading sweeping through the markets last week, hopes for economic recovery dominated the trade, with Friday’s nonfarm announcement adding to the theme, despite a continued rise in the number of coVID-19 cases worldwide and riots in many parts of the United States.
On Friday, labor Department data showed the U.S. economy unexpectedly added 2.509 million jobs in May, while market expectations for an 8 million drop. The unemployment rate fell to 13.3%, just below April’s high.
Stocks rose on Wall Street after the jobs report. The dollar rose against a basket of currencies. Prices for U.S. Government debt fell.
The Nasdaq rose above its record closing high set in February, but narrowed its gains to close just below that level. The S&P 500 and Dow are now down 5.7% and 8.3% from their respective record closing highs.
All three MAJOR US stock indices rose more than 2 per cent on the day. The Dow Jones Industrial Average closed up 829.16 points, or 3.15 percent; The S&P 500 ended up 81.58 points, or 2.62 percent. The Nasdaq closed up 198.27 points, or 2.06 percent.
“While it’s certainly a great jobs report, a lot of good news has been priced in,” said Matt Miskin, co-chief Investment strategist at John Hancock Investment Management in New York. “Forecasts and expectations for future economic recovery are likely to be higher and therefore harder to meet or exceed.”
“Friday’s data was a big surprise,” said Michael Arone, chief investment strategist at State Street Global Advisors.
Arone added: “This is further confirmation that the economy is getting back on track. This is a strong signal that the impact is temporary and the economy is improving. May this momentum continue.”
Asian market early on Monday, risk trading continued, Asian stocks mostly open higher. The Nikkei 225 average opened 1.17% higher; South Korea’s KOSPI index opened up 1.41%. Australia is closed today for the Queen’s birthday.
In currency markets, the dollar edged higher to close at 96.97 after the strong non-farm payrolls data, with the U.S. index under further pressure in early Asian trading on Monday, as improved risk sentiment hit safe-haven demand.
“Friday’s US jobs data was better than expected,” said Chuck Tomes, portfolio manager at Manulife Asset Management. The market’s next reaction was expectations of better US growth and a steepening yield curve, both of which boosted the dollar.”
Tomes added that uncertainty about the economic outlook and the possibility of a second outbreak had previously limited the dollar’s gains.
The renewed dollar decline comes as gold continues to come under pressure, trading around $1,680 after falling more than $40 on Friday to hit the 1670 mark.
“U.S. employment was significantly stronger than expected, adding 2.5 million jobs versus 7.5 million, a 10 million gap that raised expectations for a recovery,” said Bart Melek, head of commodity strategy at TD Securities in New York.
Melek added that gold was also under pressure from stronger U.S. Treasury yields and a slightly higher dollar, “which means the opportunity cost of holding gold in a portfolio has gone up.”
Oil prices opened sharply higher after OPEC+ worked overtime over the weekend
On June 6, OPEC and non-OPEC producers, led by Russia, held a ministerial videoconference and agreed to maintain the current production cut of 9.7 million barrels a day until the end of July.
OPEC and non-OPEC countries agreed to extend production cuts of 9.7 million barrels a day until the end of July, the statement said. Countries that failed to meet 100 per cent of their quotas in May and June will make up for the shortfall by cutting additional output between July and September.
The joint MINISTERIAL Monitoring committee of OPEC and non-OPEC producers will closely monitor the world energy market and oil production levels and meet once a month until December 2020 to ensure the implementation of the production cuts is fair, timely and impartial, the statement said.
According to a Bloomberg survey, OPEC’s overall output cut was about 77 percent in May. Countries such as Saudi Arabia, the United Arab Emirates and Algeria have fully met their production cuts, Russia is close to meeting quotas and Iraq, Nigeria and Kazakhstan are far behind.
Countries that exceeded their quotas in May and June were asked to make up for the cuts in July and September. Countries that have been slow to implement cuts include Iraq, Nigeria and others. Iraq overproduced 520,000 b/d in May, while Nigeria overproduced 120,000 b/d. Both countries have agreed to additional production cuts.
Saudi Arabia, Kuwait and the United Arab Emirates had voluntarily cut their output by an additional 1.18 million barrels on top of the agreement, and it was unclear whether they would continue to do so after June.
Oil prices opened higher on Monday as OPEC+ agreed to extend production cuts over the weekend, with WTI crude up about 3 percent to break the key $40 level, while Brent rose 3 percent to break the $43 level.
Since April, OPEC+ ‘s production cuts have pushed international oil prices higher. In June, the main Brent contract briefly regained $40. This time, it has rebounded more than 70 percent. Since its April low, U.S. WTI crude has more than doubled, making it the strongest rebound in history.
The latest decision by major producers on Tuesday will help Opec run down inventories by three to four million barrels a day, said Bjornal Tunhaigen, an analyst at Consultancy Rustad Energy. “The more we run down inventories, the higher prices go,” he said.
For the rest of the day, markets will also need to watch comments from European Central Bank President Christine Lagarde. European Central Bank President Christine Lagarde will appear before the European Parliament at 21:45 Beijing time on Monday to focus on her views on the economic outlook.