Important Highlights & commentaries of the global market.
Positive economic signals seemed to support sentiment during last week. The encouraging US employment report for June was the latest sign that the worst of the crisis is likely behind us, pushing the stock market higher despite the fear that the latest resurgence in US infections might derail the reopening process and keep consumption down.
In US, pending home sales jumped over 44% in May, more than double the consensus estimate. Thursday’s employment report reinforced the strong jobs momentum, showing a record 4.8 million gain in nonfarm payrolls in June. After losing an unprecedented 22 million jobs in March and April, the economy has added back 7.5 million payrolls in May and June. The unemployment rate also fell more than expected, from 13.3% to 11.1%. Given that 70% of GDP comes from consumer spending, improvement in the labor market will be vital to the economic recovery. Jobless claims reading was less encouraging, however, showing only a modest decrease in initial claims (from 1.48 million to 1.43 million) while continuing claims rose slightly.
For the week ahead in US, ISM non-manufacturing PMI for June is due on Monday, but even greater attention might fall on Thursday’s weekly jobless claims, as they will show the impact of reclosures on employment. America had a troublesome couple of weeks, with California, Texas, Florida, and Arizona all closing down bars again due to a sharp spike in infections. Combined, these four states are home to almost 100 million people and account for roughly one-third of the US economy,
In Europe, economic data indicated that the plunge continued to ease in June as lockdown restrictions were lifted and shops and businesses reopened. The number of people out of work in Germany rose by a less-than-expected 69,000 to 2.943 million people, Labor Office data showed. German retail sales jumped 13.9% q/q in May, much stronger than the consensus estimate of 2.8%. Retail sales rose 3.8% y/y, whereas economists had expected a 3.5% drop.
Eurozone’s manufacturing PMI continued to show substantial progress with the easing of lockdown restrictions. The June flash manufacturing PMI rose to 46.9 from 39.4, beating expectations. UK Manufacturing returned to expansion in June, with the flash PMI rising to 50.1 from 40.7. Eurozone inflation accelerated to 0.3% in June from 0.1% in May, although core inflation slid to 0.8% from 0.9%. For the week ahead, the EU will table a compromise proposal on the recovery fund to breach the gap between the nations that want to give out grants, and those that prefer to give out loans.
In China, the Caixin/Markit Manufacturing PMI rose to a six-month high reading of 51.2 in June from May’s 50.7. China’s official manufacturing PMI rose to a three-month high of 50.9 in June, its fourth straight month of a reading above 50, which suggests improving conditions from the prior month.
Read our complete market report prepared weekly by Blackmount advisors.