Investor Focus on Federal Reserve’s Policy Meeting this Week

Overnight Asia
US stock futures edged up and European contracts retreated as investors mulled how much further to take the rally in global equities that’s been powered by reopening economies and reduced Coronavirus infection rates. Asian stocks climbed on Monday after Friday’s US jobs report smashed economists’ expectations, bolstered hopes for a quick economic rebound and sent the S&P 500 Index to the highest close since February. The Dollar headed for an eighth straight day of declines, while 10-year Treasury yields ticked up after surging last week.

With US shares close to wiping out their losses for the year, investor focus turns to the Federal Reserve’s policy meeting this week, with officials likely to re-commit to using their full range of tools to support the US economy during the pandemic. Meanwhile, global governments are gradually easing their Coronavirus lockdowns to revive growth while controlling the spread of Covid-19.

Crude oil fluctuated on Monday, as traders mull prospects for further gains in the wake of six straight weekly advances. OPEC, at the weekend, agreed to a one-month extension of its record oil-production cuts.

What to watch this week:

  • New York City will begin re-opening after recording its first day with no virus fatalities since March. India starts a phased lifting of its nationwide lockdown. The Netherlands and Belgium plan to open bars and restaurants. New Zealand could remove most of its remaining restrictions
  • ECB President Christine Lagarde attends a European Parliament hearing on Monday
  • Japanese Prime Minister Shinzo Abe’s government will submit a second extra budget to parliament on Monday
  • Federal Reserve policy decision is on Wednesday. Officials are expected to leave rates above zero and re-commit to using their full range of tools
  • OECD releases its economic outlook on Wednesday, a twice-yearly analysis of the economic prospects of member countries
  • Euro-area finance ministers meet on Thursday to discuss the EU’s recovery package and Eurogroup presidency succession
  • Golf’s PGA holds its first tournament since the Coronavirus lockdowns – the Charles Schwab Challenge in Fort Worth, Texas. Spanish soccer league La Liga will also resume

Here are the major moves in markets:
Stocks:

  • S&P 500 futures gained 0.20% as of 7.19 am in London. The Index closed 2.60% higher on Friday
  • Euro Stoxx 50 futures fell 0.70%
  • MSCI Asia Pacific Index rose 0.70%

Currencies:

  • The Japanese Yen was little changed at 109.52 per Dollar
  • The offshore Yuan slipped 0.20% to 7.0803 per Dollar
  • The Euro was little changed at $1.1286
  • The British Pound rose 0.30% to $1.2699

Bonds:

  • The yield on 10-year Treasuries was little changed at 0.90%
  • Japanese 10-year yields were little changed at about 0.04%

Commodities:

  • West Texas Intermediate crude climbed 1.00% to $39.94 a barrel
  • Gold was little changed at $1,691 per ounce

US Market Wrap
Stocks surged on Friday after a blowout US jobs report for May showed the US economy unexpectedly added millions of jobs last month as businesses began to reopen after being shut down for weeks because of the Covid-19 pandemic. The Department of Labour said ahead of the market opening that the economy added 2.5 million jobs last month, stunning Wall Street as it had braced for a fall of 7.73 million. The unemployment rate fell to 13.30% well under the Street’s view for 19.80%. Weekly jobless claims filed since the outbreak slammed into the economy in the middle of March had indicated that more than 42 million jobs had been lost since then.

All 11 sectors of the Standard & Poor’s 500 ended higher, with seven gaining more than 2.00%.

Energy led advancing sectors, jumping nearly 7.50% as crude-oil futures popped on the jobs data as well as reports of a videoconference meeting between the Organisation of the Petroleum Exporting Countries and other producers over the extension of production cuts. West Texas Intermediate rose almost 5.20% to $39.35 a barrel while international benchmark Brent advanced nearly 5.40% to $42.14 a barrel. Exxon Mobil (XOM) rose 8.10%, and Chevron (CVX) added 4.70%. Occidental Petroleum (OXY) soared nearly 34.00%.

Financials added about 3.90%, led higher by Travelers (TRV) 5.40% rise and JPMorgan Chase’s (JPM) 4.50% gain. American Express (AXP) advanced 3.00%.

Industrials rose 3.70%, driven higher by Boeing’s (BA) 11.50% jump. Raytheon Technologies (RTX) surged 6.80% and Caterpillar (CAT) added 4.80%.

Tech shares gained nearly 2.70%. Apple (AAPL) advanced 2.90%, and Intel (INTC) firmed 2.20%.

Slack Technologies (WORK) dropped more than 14.00% after Wedbush Securities warned that the collaborative working platform provider could face ‘lurking’ competition from Microsoft (MSFT) as companies prepare for their workforce to work remotely for the foreseeable future. Microsoft (MSFT) added 2.30%.

The Dow Jones Industrial Average ended nearly 3.20% higher to close out the week 6.80% higher. The S&P 500 added 2.60% to finish the five-day period up 4.90%. The Nasdaq Composite added about 2.10%, capping the week 3.40% higher.

Source: Sanlam Private Wealth

Daily Chatter – 08 June 2020