Morning Update Note
Friday 5th June 2020
- US stocks closed mostly lower on Thursday after the Labor Department published some more disappointing unemployment claims data. At the close, the Dow Jones Industrial Average was up 0.05% at 26,281.82, while the S&P 500 was 0.34% softer at 3,112.35 and the Nasdaq Composite saw out the session 0.69% at 9,615.81.
- Thursday’s main focus was the Department of Labor’s latest unemployment claims data, which revealed layoffs in the US continued at a furious but slightly slower pace last week. Initial unemployment claims during the week ending on 30 May dropped by 249,000 to reach 1.877m (consensus: 1.75m). Last week 2.1m Americans lodged new claims. The four-week moving average meanwhile, which aims to smooth out the variations from one week to the next, fell by 324,750 to 2.284m.
- Data from Challenger, Gray & Christmas revealed that US employers cut 397,016 jobs in May, down 40.8% from April’s total of 671,129. While the number was a marked decrease on the prior month, it was still the second-highest total in the data series’ 27-year history.
- In the corporate space, coronavirus-stricken Royal Caribbean Cruises offered up to $2bn in senior notes and convertible bond that mature in 2023 in order to help the group repay debt, while shares in Wells Fargo were upgraded to ‘hold’ by analysts at Deutsche Bank.
- The FTSE100 ended the day down 0.64% and the FTSE 250 was 0.4% weaker following three days of gains, as investors mulled the latest reading on the UK construction sector and rifled through the European Central Bank’s latest easing announcement.
- The European Central Bank surprised markets with a larger-than-expected increase in its bond buying programme against the pandemic, known as PEPP. This coincided with the overnight announcement of a second stimulus package from Bering worth €130bn, this is notably higher than the €50 – 100bn figure reported last week.
- All of the ECB’s main interest rates were steady, with that for the main refinancing operations kept at 0.0%, the marginal lending facility at 0.25% and the deposit facility at -0.5%.
- On home shores, a survey released earlier showed the downturn in the construction sector eased last month as sites started to reopen, but output remained at record lows. The IHS Markit/CIPS UK construction total activity index was 28.9 in May, the second-lowest since February 2009 and well below the neutral 50.0 point. The construction sector has been hit hard by the Covid-19 pandemic, with the lockdown closing sites and companies across the supply chain temporarily shutting down and furloughing staff.
- In UK equity markets, Rolls-Royce was 1.28% lower after the aerospace and defence giant said it was cutting 1,500 jobs at its base in Derby and 700 at its Renfrewshire plant in Scotland. It had already announced last month that it would be axing 9,000 jobs.
- Shares of Aston Martin Lagonda slid 3.2% after the luxury car maker said it was axing up to 500 jobs as it cut back production of front-engined sports cars and focussed on its DBX sports utility model.
- Tokyo stocks extended their winning streak to a fourth session Thursday, as investors hailed a further rise in U.S. equities and the yen’s drop against the dollar. Japan reported Friday that household spending fell 11% in April from the year before, nearly twice the 6% decline in March.
- In Asia, the Hong Kong authorities showed restraint as thousands of people defied a police ban to join a candlelight vigil Thursday marking the 31st anniversary of China’s crushing of a democracy movement in Beijing’s Tiananmen Square. That appeared to have at least slightly alleviated worries over recent efforts by Chinese leaders to exert more control over the former British colony.
- Automaker Toyota, technology and entertainment giant Sony and other export-oriented issues attracted bids thanks to economic recovery hopes.
- Australian retail sales fell 17.7% in April as the full impact of Covid-19 lockdowns was felt across the economy. The fall in April follows a rise of 8.5% in March, when concerns about an extended period of social isolation prompted a rush on stores for basic supplies.
- 10yr and 30yr US treasuries are currently trading at 0.86% and 1.67% respectively.
- 10yr UK gilts trade with a yield of 0.33%.
- German 10yr bund yields trade at -0.30%.
- 10yr Italian and Spanish bond yields trade at 1.42% and 0.55% respectively.
- The WTI crude oil price is $37.89
- Brent crude is $40.71
- The gold price is $1,712.40
- The silver price is $17.94
- The COMEX copper price is $2.52
- The Yen is trading at 109.33 against the US dollar.
- The pound is trading at 1.27 against the US dollar.
- The pound is trading at 1.12 against the Euro.
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