A further slowing in growth
The latest JOLTs (job openings) showed there are 5.9 million jobs available, more than expected, but it didn’t give markets any kick.
The European market inherited a soporific start to the week from the APAC region, the latter in part due to holidays in Japan and Singapore. So with much of Europe sweltering in temperatures of between 30 and 40 degrees Celsius, the invitation to do nothing was readily accepted. The US hasn’t done a lot either, save that rotation out of ‘big-tech’ into smaller cap stocks and industrials, already underway at the end of last week following announced US actions against Tik Tok and WeChat, has extended. The Nasdaq has ended Monday down by 0.4% while the Dow is up 1.3% and the Russell 2000 up 1%. The S&P finished +0.3%.
Currency market moves look to have been more order-driven than news-driven with no consistency across the G10 spectrum. AUD, NZD and EUR are all a touch softer so far this week, but so too is the CHF and to a lesser extent the JPY. Against this, GBP and CAD are both a little firmer, the former seemingly on some positive mood music regarding chances of an EU-UK post-Brexit trade deal (courtesy of weekend missive from UK Cabinet Minister Michael Gove) and the latter on higher oil prices (WTI crude is up 2% to $42). Oil looks to have been boosted by weekend comments from Saudi Aramco’s CEO, claiming crude demand in Asia is almost back to pre-COVID levels and that demand for energy will probably improve over the rest of the year.
Bond markets saw European yield 1-2bps lower but in the US Friday’s yield back up has extended, 10s up a further 1.5bps to 0.58%.
No sign so far of any progress towards a deal this week that would obviate the need for legal challenges to President Trump’s four Executive orders signed on Saturday related to unemployment benefits, payroll taxes, tenant evictions and student loans. Failure to strike a deal by the weekend, that surely is now at least a 50:50 prospect, has potential to unsettle risk sentiment either side of the weekend.
Chicago Fed President Charles Evans, who was speaking overnight but not on economic or monetary policy matters, was interviewed on CBS’s Face the Nation on Sunday night noting that it’s “incredibly important” the U.S. deliver another round of fiscal policy measures to aid the economy as it weathers the coronavirus pandemic. “Fiscal policy has been unbelievably important in supporting the economy during the downturn that we’ve been experiencing. That continues to be important because we’ve not got control over the virus spread. I think that public confidence is really important, and another support package is really incredibly important,” Evans said.
Economists at the Federal Reserve Bank of New York on Monday published a report saying that a ‘sizeable share’ of US publicly listed groups face a potential credit crunch, a slump in cash flow brought on by the pandemic squeezes companies with elevated levels of debt (FT reporting).
China announced tit-for-tat sanctions against 11 US officials including five members of Congress, following the similar action taken by the US over the weekend, though it doesn’t include any White House officials, underscoring the largely symbolic nature of the action. More pertinent is the meeting at the end of the week between key US and Chinese trade officials on a progress report on the phase 1 trade deal, though here the strong sense is that the Trump administration won’t want to jeopardise the deal this side of the election for fear of alienating the important mid-West farming constituency.
Florida and Arizona both posted their lowest total for new daily infections since early June, though California reported an above-average increase in new cases after fixing glitch in the state’s data system.
The only piece of economic news of any note has been the US JOLTS (job opening) series, an old Janet Yellen favourite but which, benign for June, is too backward looking in current circumstances to be of much value. These rose to 5,889k, well above the 5,300k expected and 5,371k in May.
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