Tin tức thì trường

Major US stock indexes have risen moderately, as disappointing US private sector employment data have increased the likelihood that the Fed will cut interest rates to counter the potential slowdown in the economy.

The ADP and Moody's Analytics report showed that in May, employment in the private sector grew by only 27,000, after increasing by 271,000 jobs in April. Economists had expected an increase of 180,000 jobs. May result was the worst since March 2010.

The disappointing data raised expectations that the US central bank would cut interest rates by at least 75 basis points by the end of the year. Recall, yesterday Fed Chairman Jerome Powell made it clear that the central bank is open to loosen monetary policy in order to save the economy. According to him, the Fed will "act properly" to support economic growth. Powell noted, however, that the Fed does not know “how or when” the trade conflict will be resolved. “We are closely following the implications of these events for the US economic outlook,” he added.

Market participants also drew attention to data from ISM, which indicated an unexpected improvement in business activity in the services sector in May. According to the data presented, the business activity index in the US service sector rose to 56.9 points in May from 55.5 points in April. Analysts predicted that the index will remain at the level of 55.5 points

Meanwhile, trade tensions eased a bit as several Republican legislators noted that they were opposed to new tariffs on Mexican imports, while some hinted at the possibility of blocking their imposition. Meanwhile, Finance Minister Stephen Mnuchin plans to meet with the Governor of the People’s Bank of China and Ghana this weekend. This will be the first personal meeting of key trade negotiators from the United States and China.

Most of the components of DOW finished trading in positive territory (23 of 30). The leader of growth were shares of Cisco Systems, Inc. (CSCO; + 2.76%). Walgreens Boots Alliance, Inc. was an outsider. (WBA; -1.38%).

Almost all sectors of the S & P recorded an increase. The greatest growth was shown by the utility sector (+ 1.5%). Only the raw materials sector declined (-1.1%).

At the time of closing:

Dow 25,540.05 +207.87 +0.82%

S & P 500 2,826.19 +22.92 +0.82%

Nasdaq 100 7,575.48 +48.36 +0.64%

The U.S. Energy Information Administration (EIA) revealed on Wednesday that crude inventories climbed by 6.771 million barrels in the week ended May 31. Economists had forecast a decrease of 2.000 million barrels.

At the same time, gasoline stocks surged by 3.205 million barrels, while analysts had expected an increase of 1.000 million barrels. Distillate stocks jumped by 4.572 million barrels, while analysts had forecast an advance of 0.500 million barrels.

Meanwhile, oil production in the U.S. increased by 100,000 barrels a day to 12.400 million barrels a day.

U.S. crude oil imports averaged 7.9 million barrels per day last week, up by 1,065,000 barrels per day from the previous week.

• Incoming data suggests that global growth slowdown may have bottomed out, with some firming in growth projected for 2020
• Global growth outlook vulnerable to trade tensions, Brexit, uncertain recoveries in Argentina and Turkey
• If global growth falters, policymakers should act in a coordinated fashion with decisively eased monetary policy, stimulus in countries with fiscal space
• GDP loss from U.S.-China tariffs could reach $455 billion, larger than South Africa's annual economic output
• Current and contemplated U.S.-China tariffs could reduce global GDP growth by 0.5% in 2020
• U.S.-China tariffs are "self-inflicted wounds that must be avoided"; trade barriers should be reversed
• Efforts to modernize WTO's rules on subisidies, intellectual property and services should be stepped up

The Institute for Supply Management (ISM) reported on Wednesday its non-manufacturing index (NMI) came in at 56.9 in May, which was 1.4 percentage points higher than the April reading of 55.5 percent. The May reading pointed to the fastest expansion in the services sector since February.

Economists forecast the index to remain at 55.5 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

16 non-manufacturing industries reported growth last month, the ISM said.

According to the report, the ISM’s non-manufacturing business activity measure rose to 61.2 percent, 1.7 percentage points higher than the April reading of 59.5 percent. That reflected growth for the 118th consecutive month, at a faster rate in May. The new orders gauge increased to 58.6 percent, 0.5 percentage point higher than the reading of 58.1 percent in April. The employment indicator surged 4.4 percentage points in May to 58.1 percent from the April reading of 53.7 percent. Meanwhile, the Prices Index dropped 0.3 percentage point from the April reading of 55.7 percent to 55.4 percent, indicating that prices increased in May for the 24th consecutive month.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, "The past relationship between the NMI and the overall economy indicates that the NMI for May (56.9 percent) corresponds to a 2.9-percent increase in real gross domestic product (GDP) on an annualized basis.”

The latest report by IHS Markit revealed on Friday the seasonally adjusted final IHS Markit U.S. Services Business Activity Index (PMI) stood at 50.9 in May, down from 53.0 in April, but was in line with the earlier released “flash” figure.

The reading signaled the slowest business activity expansion across the U.S. service sector since the current period of growth began in February 2016.

Economists had forecast the index to stay unrevised at 50.9.

According to the report, new orders received by service providers increased at the softest pace since March 2016, and business confidence fell to its lowest level since June 2016. Meanwhile, the job creation rate accelerated. On the price front, input prices increased at a softer and only marginal pace in May, while the rise in cost burdens was the slowest since September 2016.

• We will be prepared to adjust policy to sustain growth
• Our job is to sustain the expansion
• International economy is a delicate place
• US economy is in the midst of a very lengthy expansion, with confident consumers
• There is no destination point for full employment
• Watching payroll closely but no signal from one month
• Economy is bringing people back to the workforce
• Interest rates are likely to be lower than what people are expected to in previous downturns.  Have to be open-minded about other policies
• She does not see negative interest rates being a useful part of Fed's arsenal
• We have not hit 2% inflation on a sustainable basis.
• Fed is committed to the 2% sustained, symmetrical inflation goal
• Fed must avoid slippage in inflation expectations
• Says she is concerned about policies whittling away at core resilience of banking system
• Notes risky corporate borrowers have taken a lot of debt in this recovery

U.S. stock-index futures rose moderately on Wednesday, paring  some of their earlier gains after the release of much weaker-than-expected ADP jobs data.

Global Stocks:

(company / ticker / price / change ($/%) / volume)

• Prudent to take a look at monetary policy setting
• You have to wonder about the inflation process given persistent weakness in price pressures
• Low inflation itself is grounds to weigh more accommodation
• Says his estimate for 2019 GDP is 2%
• Has to be sure that the Fed is not getting in the way of "good growth"
• There may be insurance reasons to talk about policy adjustments
• Not concerned about inflationary effects of tariffs; they're a one-off
• Real issue we have if stating what we mean by "symmetric"
• Need to defend 2% symmetric inflation target "very strongly"

Uber (UBER) initiated with a Outperform at Raymond James; target $50

American Intl (AIG) downgraded to Hold from Buy at Deutsche Bank

Statistics Canada reported on Wednesday the labour productivity of Canadian businesses increased 0.3 percent in the first quarter 2019, after an unrevised 0.4 percent decline in the fourth quarter of 2018.

Economists had forecast a 0.3 percent gain.

According to the report, the slight rebound in productivity primarily reflected the decline in hours worked (-0.3 percent) following seven consecutive quarterly increases, while business output remained virtually unchanged.

The employment report prepared by Automatic Data Processing Inc. (ADP) and Moody's Analytics showed on Wednesday the U.S. private employers added 27,000 jobs in May. That was the smallest monthly jobs gain since March 2010.

Economists had expected a gain of 180,000.

The increase for April was revised down to 271,000 from the originally reported 275,000.

“Following an overly strong April, May marked the smallest gain since the expansion began,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Large companies continue to remain strong as they are better equipped to compete for labor in a tight labor market.”

Meanwhile, Mark Zandi, chief economist of Moody’s Analytics, noted, “Job growth is moderating. Labor shortages are impeding job growth, particularly at small companies, and layoffs at brick-and-mortar retailers are hurting.”

Felicity Emmett, an analyst at ANZ, notes that Australia’s quarterly GDP growth picked up a little in Q1 to 0.4% q/q, although annual growth continued to slow and is now down to 1.8%, its slowest pace since 2009 in the midst of the global financial crisis.

• “The weak tone to GDP confirms the dovish stance taken by RBA Governor, Phil Lowe, but the Bank is likely to be disappointed yet again by these data. The result looks to be less than the average 0.6-0.7% q/q growth the RBA had expected for Q1 and Q2. And unless Q2 partials pick up strongly it suggests that another round of growth downgrades in the Bank’s August Statement on Monetary Policy.
• The report shows that weakness in the economy has become more broadly based, and the supports to growth more narrow.
• Overall GDP growth continues to be held down by a weak household sector, under pressure from persistently low-income growth, high debt and falling house prices.
• Ultimately, the Q1 GDP data provide further confirmation that the economy likely needs more stimulus to generate stronger growth, lower unemployment and higher inflation.”

• Prefer to be patient here and let events unfold
• Need to see further deceleration in the economy before deciding
• Fed is in the neighbourhood of neutral rates right now
• It's too early to make judgement on rate cut call
• Yield curve reflects heightened trade tensions 
• Consumers in good shape, businesses face uncertainty
• We are on heightened alert as a result of trade tension
  
• Threats against Mexico are having a "chilling effect" on business
  

James Smith, a developed markets economist at ING, notes that at 51, the latest Markit/CIPS PMI of UK economy is a touch better than in April, but nevertheless suggests the uncertain backdrop is continuing to weigh on growth.

• "Beneath the headline figures though, we think there are two glimmers of light for the Bank of England.

1. Stronger job creation. Firstly, Markit/CIPS noted that the rate of job creation was the strongest for six months. On one hand, this could be a continuation of a recent trend whereby some firms appeared to increase hiring to offset lower investment, on the basis that staffing levels are easier to change in future given the uncertainty surrounding Brexit. However, the press release noted that in this case, the hiring flurry was linked to “long-term business expansion” and “efforts to boost operating capacity”. It, therefore, seems more likely that the Article 50 extension and corresponding temporary dip in uncertainty has, at least to a certain extent, helped unlocked some pent-up demand for labour.
2. Firms passing on higher wage costs to customers. The other ray of hope for the Bank of England stems from costs. As has been the case for some time, the report indicates that wage costs are rising (partly linked to the tight jobs market, but also the marked increase in the minimum wage over recent years). The key thing as far as policymakers are concerned is that stronger levels of demand, coupled with “efforts to protect margins”, are prompting firms to pass these higher costs onto the consumer. Given that wage growth has been a key pillar of the Bank of England’s argument for further tightening, this latter point suggests that a rate hike later this year shouldn’t be 100% ruled out. Don't forget that Governor Mark Carney hinted back in May that markets are underestimating the central bank's tightening plans.

• In reality though, we think it is much more likely that the Bank keeps policy unchanged for the rest of 2019. While the recent, weaker PMIs don't completely tally with the more resilient 'hard data', this latest subdued survey reading suggests that growth is likely to remain fairly lacklustre over coming months. With ‘no deal’ fears rising once again, we expect investment to continue falling, offsetting some marginally better news in consumer spending."

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. rose 1.5 percent in the week ended May 31, following a 3.3 percent drop in the previous week.

According to the report, the refinance applications surged 6.4 percent, while applications to purchase a home declined 2.4 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased to 4.23 percent from 4.33 percent.

“Mortgage rates dropped to their lowest level since the first week of 2018, driven by increasing concerns regarding the ongoing trade tensions with China and Mexico,” said Mike Fratantoni, MBA senior vice president and chief economist. “Some borrowers, particularly those with larger loans, jumped on the opportunity to refinance, bringing the index and average refinance loan size to their highest levels since early April. Additionally, refinances for FHA and VA loans jumped by 11 percent.”

• Italy hasn't complied with debt criterion
• Excessive debt procedure (EDP) is warranted for Italy
• Recent Italian measures have damaged public finances
• Says that Italy's growth has come almost to a halt
• Reform momentum has slowed in Greece
• Greek measures undone important reforms 
• Recently Greek measures costly, not right

• EC triggers disciplinary process against Italy over public debt
• Warns about Italian debt increasing due to "snowball effect"
• Says Italy is backtracking from structural overhauls, pension reform
• Also says Greece fiscal measures are a cause of concern

• UK curve pushed down by global factors

Georgette Boele, analyst at ABN AMRO, suggests that they strongly believe that the surge in gold prices has happened because of broad dollar weakness rather than safe haven demand for gold and remain positive on the outlook for gold.

“First, the decline in gold prices came to a halt above and relatively closely to the 200-day moving average, and thereafter prices bounced higher. This is a positive development from a technical point of view, and strengthens our case that gold prices will rally towards the end of this year. Our year-end target is USD 1,400 per ounce. Second, the developments on the trade front have decreased the likelihood of tighter central bank policy around the globe. In fact, easier monetary policy is far more likely at this point in time. Third, the US dollar is struggling to rally in the current risk-off environment. This is because financial markets fear the policy uncertainty that comes with President Trump’s increasingly erratic trade policy. So, the US dollar is likely also being punished because the US’s longer term credibility is weakening. Fourth, we expect the Chinese authorities to step up stimulus to support the economy. It is likely that.”

Eurostat said, in April 2019, compared with March 2019, industrial producer prices fell by 0.3% in the euro area (EA19) and remained unchanged in the EU28. In March 2019, prices decreased by 0.1% in the euro area and remained unchanged in the EU28.

In April 2019, compared with April 2018, industrial producer prices rose by 2.6% in the euro area and by 2.9% in the EU28.

Industrial producer prices in the euro area in April 2019, compared with March 2019, fell by 1.5% in the energy sector, while prices rose by 0.1% for intermediate goods, capital goods and durable consumer goods, and by 0.5% for non-durable consumer goods. Prices in total industry excluding energy rose by 0.2%. In the EU28, industrial producer prices fell by 0.4% in the energy sector, while prices rose by 0.1% for capital goods and durable consumer goods, by 0.2% for intermediate goods and by 0.5% for non-durable consumer goods. Prices in total industry excluding energy rose by 0.2%.

According to estimates from Eurostat, in April 2019 compared with March 2019, the seasonally adjusted volume of retail trade decreased by 0.4% in the euro area (EA19) and by 0.3% in the EU28. In March 2019, the retail trade volume remained unchanged in the euro area and increased by 0.3% in the EU28.

In April 2019 compared with April 2018 the calendar adjusted retail sales index increased by 1.5% in the euro area and by 2.9% in the EU28

In the euro area in April 2019, compared with March 2019, the volume of retail trade decreased by 0.4% for food, drinks and tobacco and for non-food products, while automotive fuel increased by 0.1%. In the EU28, the retail trade volume decreased by 0.4% for non-food products and by 0.2% for food, drinks and tobacco and for automotive fuel.

In the euro area in April 2019, compared with April 2018, the volume of retail trade increased by 1.5% for food, drinks and tobacco, by 1.3% for automotive fuel and by 1.2% for non-food products. In the EU28, the retail trade volume increased by 3.0% for non-food products, by 2.7% for food, drinks and tobacco and by 1.9% for automotive fuel.

According to the report from IHS Markit/CIPS, May data pointed to another marginal rise in business activity across the UK service sector, with the rate of expansion edging up to a three-month high. The recovery in service sector output was supported by a modest rebound in new business and the fastest upturn in staffing levels since November 2018. Business optimism also improved in May, with service providers signalled that growth expectations picked up to the strongest since last September.

At 51.0 in May, up from 50.4 in April, the seasonally adjusted UK Services PMI Business Activity Index registered above the 50.0 no change mark for the second month running. The latest reading signalled a marginal rise in service sector output, with the rate of expansion the strongest since February.

According to the report from IHS Markit, May saw the continued expansion of the euro area private sector, albeit at a modest pace.

After accounting for seasonal factors, the IHS Markit Eurozone PMI Composite Output Index rose to 51.8 in May, up from April’s 51.5 and slightly better than the earlier flash reading (51.6). The latest index reading was the highest for three months, and extended the current period of continuous growth to just under six years.

In line with the recent trend, it was the service sector that provided the impetus to overall growth during May, expanding at a solid pace. In contrast, manufacturing output fell for a fourth successive month, albeit at the slowest pace since February.

Modest growth of the private sector economy occurred at a time when levels of incoming new business were rising only slightly for the third month running. With activity increasing solidly, firms were subsequently able to reduce their overall backlogs of work for a third consecutive month. Companies were also able to keep on top of their workloads thanks to the continued expansion of the private sector workforce. May’s survey indicated a solid rise in staffing levels, albeit a slower pace than in April.

Finally, business confidence, undermined by ongoing worries over Brexit, US-China trade and European political instability, fell in May to its lowest level since the start of the year.

Nick Kounis, head of financial markets research, suggests that they are expecting the PBOC to cut its main policy rate for the first time since economic growth weakened.

“We expect a 25bp cut this year and another next year, taking the 1y lending rate to 3.85%. Previously we expected no change given the targeted easing strategy. We also expect further reductions in the RRR, with the rate for large banks to be cut by 150bp this year (previously 100bp) and another 100bp in 2020 (previously 50bp), to take it to 11% by the end of that year. Over and above these steps, the Chinese authorities will also continue adding targeted fiscal and monetary support, with a specific focus on private firms and firms hit most by the US import tariffs.”

• 2020 GDP forecast seen at 6.0% from 6.1% previously

• China's stimulus is sufficient to stabilise growth in 2019-20

• But uncertainty around trade tensions remains high

• Some additional easing will be warranted if trade tensions escalate further

• Fiscal expansion could be used to help stabilise China's economy

• China FX flexibility should increase.

Chinese President Xi Jinping said the country's economy is stable, healthy and well placed to meet all risks and challenges, according to a transcript published by the Xinhua news agency.

Xi did not mention China's trade war with the United States, which escalated last month after Washington and Beijing slapped new tit-for-tat tariffs on each other.

"Looking into the future, China's economy bears the supporting conditions for stable, healthy and sustainable growth," he said.

Xi noted China had ample room to manoeuvre in the macroeconomic policy space and that the country's economy got off to a good start in 2019 as key indicators were kept in a reasonable range.

Global growth is forecast to ease to 2.6% this year, reflecting weaker-than-expected trade and investment, the World Bank said in its semi-annual report. The 2019 growth outlook was revised down from 2.9%.

Growth is projected to gradually rise to 2.8% by 2021, predicated on continued benign global financing conditions and a modest recovery in emerging market and developing economies.

The bank cautioned that risks to the outlook remain firmly on the downside, including the possibility of escalating trade tensions.

• European Commission to begin infringement process against Italian government

• Italy's fiscal policies have hurt confidence, contributed to its economic slowdown

• Italian government's lack of fiscal prudence exposes Italy to possible shock loss of market confidence

Karen Jones, analyst at Commerzbank, explains that the EUR/USD pair has rallied to and so far stalled at the 100 day ma at 1.1279.

“Directly overhead lies the 2018-2019 downtrend at 1.1287/90 and we would allow for this to hold the initial test. This needs to be overcome on a closing basis in order to alleviate downside pressure and reassert upside interest. This is now favoured. Be advised that as long as the recent lows at 1.1110/06 hold on a closing basis the pattern being traced out is a potential large bullish reversal pattern. Support at 1.1110/06 is regarded as the break down point to the 2018-2019 support line at 1.1027 and the 1.0814 78.6% Fibonacci retracement.”

The U.S. Federal Reserve has sent a “very strong signal” that it’s ready to consider cutting interest rates, according to a former Fed governor.

Sarah Bloom Raskin, who sat on the Fed board from 2010 to 2014, offered that analysis in light of Chairman Jerome Powell’s recent speech in which he said the central bank “will act as appropriate to sustain the expansion.”

“I think Chairman Powell has given a message to markets that’s indicating that a rate cut is coming. This is, in essence, a very strong signal that the FOMC is actually ready to talk about cutting rates,” Raskin told.

The Federal Open Market Committee (FOMC) is scheduled to next meet on June 18-19 to decide on interest rates.

Investors have been predicting that the Fed would cut interest rates, even though the central bank had earlier indicated it expected to hold monetary policy steady throughout the year.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1363 (5410)

$1.1325 (5320)

$1.1297 (2777)

Price at time of writing this review: $1.1263

Support levels (open interest**, contracts):

$1.1246 (2976)

$1.1224 (3230)

$1.1189 (6533)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date June, 7 is 123641 contracts (according to data from June, 4) with the maximum number of contracts with strike price $1,1500 (9058);

GBP/USD

Resistance levels (open interest**, contracts)

$1.2809 (512)

$1.2770 (808)

$1.2742 (996)

Price at time of writing this review: $1.2713

Support levels (open interest**, contracts):

$1.2693 (1996)

$1.2671 (2445)

$1.2637 (1611)

Comments:

- Overall open interest on the CALL options with the expiration date June, 7 is 41816 contracts, with the maximum number of contracts with strike price $1,3450 (3277);

- Overall open interest on the PUT options with the expiration date June, 7 is 39257 contracts, with the maximum number of contracts with strike price $1,2800 (3618);

- The ratio of PUT/CALL was 0.94 versus 1.00 from the previous trading day according to data from June, 4

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.