Weekly Market Wrap 24-June to 3-July/2020

  Marius Paun | London, UK | Senior dealer | Friday 03rd July 2020

 

The US Labour Department reported the non-farm payrolls data yesterday, a day earlier due to the July Fourth holiday with US stock markets closed today. It showed employment surged by 4.8 million jobs in June better than expectations of an increase of 2.9 million jobs. At the same time, the unemployment rate fell to 11.1%, also better than 12.5% consensus.

The May figures were revised up by 190,000. The jobs gain for June is by far the single largest in the US history. Once again, leisure and hospitality sector took the lion share adding 2.1 million jobs, accounting for around 40% of the total employment growth. In reaction, the US stock market went higher as, so far, investors optimism continues to discard fears the pandemic is wreaking havoc in the southern states.

China has reported a new Covid-19 hotspot around 100 miles from Beijing where a half a million people will go into strict lockdown. The measures follow the discovery of 12 cases of coronavirus. Meanwhile, in a tit for tat response, China announced it will introduce visa restrictions on US individuals following the White House sanctions on Beijing officials.

We also had China’s official PMI data for June showing the manufacturing sector at 50.9 versus 50.4 predicted and services at 54.4 versus 53.5 expected. The report added that output is growing again albeit with exports and retail sales struggling to pick up.

David Frost, UK’s chief negotiator on exit talks with Europe, travelled to Brussels over the weekend as UK-EU trade disputes entered ‘an intensive phase’. On the domestic front, the lockdown measures are scheduled to ease further on July 4th with pubs and restaurants reopening. However, Leicester will be the exception, going back into lockdown after reports of a fresh outbreak.

In Europe, German Chancellor Angela Merkel said earlier this week that European Union members are still far apart on agreeing on the format of the recovery budget…surprise, surprise. That was not good news for the euro which moved below 1.12 to the US dollar in reaction. Nevertheless, the shared currency recovered and pretty much went sideways for the week. And one for the Brits of course, she said that EU ‘must prepare for Brexit talks to end in failure’.

Gold prices hit $1780.00 this week, for the first time in 7 years, on the back of a weaker dollar and ongoing safe-haven buying. Coronavirus concerns, the renewed US-China tensions as well as the incoming US elections later this year could all increase gold outlook as a preferred sought-after hedge.

The US crude prices recouped last week losses moving back above $40.00 per barrel. The Department of Energy released its weekly inventories data showing a decline of 7.2 million barrels versus expectations for a slide of just 0.9 million barrels.