Market Talk – June 3, 2021

Posted Jun 3, 2021 by Martin Armstrong |

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ASIA:

Chinese businesses are letting go of more workers than they are hiring, even though the economy is seeing some recovery from the pandemic, official data showed Monday. A survey conducted by National Bureau of Statistics, which polls businesses on how their operations have changed from the prior month, and compiles the responses into two Purchasing Managers’ Indexes — one for manufacturing and one for services reported that for both manufacturing and services, the employment index remained below 50 in May. That indicates businesses were laying off more workers than they were hiring.

Tesla is recalling more than 700 units of its Model 3 electric car that were imported into China, the central government’s market regulator said Thursday. Elon Musk’s automaker has also come under increased regulatory scrutiny in China in the last several months after a slew of negative consumer and media reports on brake failures and collisions.

India’s central bank will likely keep interest rates at record lows this week as it assesses the economic fallout of the country’s evolving COVID-19 crisis, but the monetary authority is expected to reiterate its commitment on liquidity. The Reserve Bank of India’s (RBI) monetary policy committee (MPC) will likely keep the key lending rate or the repo rate unchanged at 4% for a sixth straight meeting when it announces its decision after a three-day meeting on Friday.

The major Asian stock markets had a mixed day today:

NIKKEI 225 increased 111.97 points or 0.39% to 29,058.11
Shanghai decreased 12.93 points or -0.36% to 3,584.21
Hang Seng decreased 331.59 points or -1.13% to 28,966.03
ASX 200 increased 42.30 points or 0.59% to 7,260.10
Kospi increased 23.20 points or 0.72% to 3,247.43
SENSEX increased 382.95 points or 0.74% to 52,232.43
Nifty50 increased 114.15 points or 0.73% to 15,690.35

The major Asian currency markets had a mixed day today:

AUDUSD decreased 0.00921 or -1.19% to 0.76516
NZDUSD decreased 0.00905 or -1.25% to 0.71436
USDJPY increased 0.69 or 0.63% to 110.30
USDCNY increased 0.01621 or 0.25% to 6.39930

Precious Metals:

Gold decreased 39.03 USD/t oz. or -2.05% to 1,868.91
Silver decreased 0.94 USD/t. oz or -3.33% to 27.260

Some economic news from last night:

China:

Caixin Services PMI (May) decreased from 56.3 to 55.1

Hong Kong:

Manufacturing PMI (May) increased from 50.3 to 52.5

Japan:

Foreign Bonds Buying decreased from 600.0B to -1,090.0B

Foreign Investments in Japanese Stocks increased from -223.5B to 181.3B

Services PMI (May) decreased from 49.5 to 46.5

South Korea:

FX Reserves – USD (May) increased from 452.31B to 456.46B

Australia:

AIG Construction Index (May) decreased from 59.1 to 58.3

Services PMI decreased from 58.8 to 58.0

Exports (MoM) (Apr) increased from -1% to 3%

Imports (MoM) (Apr) decreased from 5% to -3%

Retail Sales (MoM) (Apr) remain the same at 1.1%

Trade Balance (Apr) increased from 5.794B to 8.028B

New Zealand:

ANZ Commodity Price Index (MoM) decreased from 2.3% to 1.3%

Some economic news from today:

India:

Nikkei Services PMI (May) decreased from 54.0 to 46.4

M3 Money Supply decreased from 10.2% to 9.9%

EUROPE/EMEA:

Britain’s services sector recorded the biggest jump in activity in 24 years last month after pubs and restaurants were allowed to resume serving customers indoors following months of lockdown, according to a closely watched business survey. The IHS Markit/CIPS Purchasing Managers’ Index rose to 62.9 in May from 61.0 in April, taking it to its highest since May 1997 and above an initial estimate of 61.8. The composite PMI, which includes previously released manufacturing data, rose to its highest since the series began in January 1998 at 62.9, up from April’s reading of 60.7. In the short term, however, inflation is rising sharply. The PMI showed that the biggest rise in prices charged by services businesses since the survey began in 1996 due to a jump in staffing costs, transport bills, and the price of raw materials.

The major Europe stock markets had a mixed day:

CAC 40 decreased 13.60 points or -0.21% to 6,507.92
FTSE 100 decreased 43.65 points or -0.61% to 7,064.35
DAX 30 increased 29.96 points or 0.19% to 15,632.67

The major Europe currency markets had a mixed day today:

EURUSD decreased 0.00866 or -0.71% to 1.21223
GBPUSD decreased 0.00715 or -0.50% to 1.40975
USDCHF increased 0.00688 or 0.77% to 0.90509

Some economic news from Europe today:

Spain:

Spanish Services PMI (May) increased from 54.6 to 59.4

Italy:

Italian Composite PMI (May) increased from 51.2 to 55.7

Italian Services PMI (May) increased from 47.3 to 53.1

Germany:

German Composite PMI (May) increased from 55.8 to 56.2

German Services PMI (May) remain the same at 52.8

Norway:

House Price Index (YoY) (May) decreased from 12.30% to 11.30%

France:

French Markit Composite PMI (May) remain the same at 57.0

French Services PMI (May) increased from 50.3 to 56.6

UK:

Composite PMI (May) increased from 62.0 to 62.9

Services PMI (May) increased from 61.8 to 62.9

Euro Zone:

Markit Composite PMI (May) increased from 53.8 to 57.1

Services PMI (May) increased from 50.5 to 55.2

US/AMERICAS:

Americans are going back to work at their fastest pace since the pandemic began. ADP announced that private payrolls in the US spiked 978,000 in May, surpassing analysts’ expectations of 680,000. This marks the most significant growth in the labor force since June 2020 when the economy added 4.35 million positions after numerous states ended or restricted lockdowns. Hospitality saw the most notable increase in May after adding 440,000 positions, education and health expanded by 139,000, transportation and utilities added another 118,000, the business sector grew by 68,000, and the other sector filings increased by 69,000. Services in general account for 850,000 of the new jobs created. The Labor Department will release the nonfarm payrolls data tomorrow, which is one of the most highly anticipated reports to gauge the pulse of the economy.

Ottawa has announced that it will increase the fine for travelers who fail to quarantine to C$5,000. At the end of February, the Trudeau administration demanded that any air travelers entering the country be subject to a COVID test and subsequent 14-day quarantine at a government-approved hotel. Since the price of the hotel stays cost around C$2,000, many travelers were opting to pay the C$3,000 fine instead which prompted the government to up the penalty. Some travelers have found a loophole by traveling through Alberta. Since Alberta never agreed to the Contraventions Act, they may only investigate travelers who fail to quarantine if another party launches a complaint. The mandatory quarantine is set to expire on June 21, but may be subject to an extension.

Federal Reserve Bank of Dallas President Robert Kaplan alluded this Thursday that America’s labor shortage could be due to unemployment benefits. “When unemployment benefits run out, we’ll find a balance,” Kaplan stated. Furthermore, he believes the Fed should begin to taper off their buyback program. “I think it would be wiser sooner rather than later to begin discussions about adjusting our purchases with a view to taking the foot off the accelerator gently, gradually, so we can avoid having to depress the brake down the road,” the president stated.

US Market Closings:

Dow declined 23.34 points or -0.07% to 34,577.04
S&P 500 declined 15.27 points or -0.36% to 4,192.85
Nasdaq declined 141.82 points or -1.03% to 12,614.51
Russell 2000 declined 18.59 points or -0.81% to 2,279.25

Canada Market Closings:

TSX Composite declined 29.76 points or -0.25% to 19,941.39
TSX 60 declined 1.4 points or -0.12% to 1,193.37

Brazil Market Closing:

Bovespa advanced 1,334.39 points or 1.04% to 129,601.44

ENERGY:

The oil markets had a negative day today:

Crude Oil decreased 0.18 USD/BBL or -0.26% to 68.6500
Brent decreased 0.26 USD/BBL or -0.36% to 71.0900
Natural gas decreased 0.021 USD/MMBtu or -0.68% to 3.0540
Gasoline decreased 0.0029 USD/GAL or -0.13% to 2.1912
Heating oil decreased 0.0113 USD/GAL or -0.54% to 2.0958

The above data was collected around 12:03 EST on Thursday

Top commodity gainers: Rubber (2.50%), Bitumen (1.46%), Soda Ash (2.01%) and Palm Oil (1.42%)
Top commodity losers: Milk (-8.75%), Copper (-3.06%), Silver (-3.33%), and Cheese (-9.35%)

The above data was collected around 12:09 EST on Thursday.

BONDS:

Japan 0.0850%(+1bp), US 2’s 0.15%(+0.008%), US 10’s 1.6215%(+3.05bps); US 30’s 2.30%(+0.016%), Bunds -0.1810% (+1.5bp), France 0.176% (+1.2bp), Italy 0.899% (+2.06bp), Turkey 18.02% (+0bp), Greece 0.8090% (-1bp), Portugal 0.474% (+2.1bp); Spain 0.477% (+1.76bp) and UK Gilts 0.845% (+4.4bp).