Daily summary: Bulls rally pauses

 

European indices finished today’s session in red after ECB President Christine Lagarde said that the pace of the Eurozone economic recovery was very uncertain and that policymakers had not discussed buying junk debt. New forecasts suggest that the GDP will decline 8.7% in 2020 and inflation will remain below the 2% target until at least 2022. The ECB left rates unchanged, in line with expectations, but increased its Pandemic Emergency Purchase Program by an unexpectedly large € 600 billion and extended its duration to at least June 2021 in order to support the bloc's economy and inflation. Earlier in the session, ongoing concerns regarding US-China tensions and uncertainty about supply cuts by major producers weighed on investors moods. However news that German administration agreed on fresh stimulus measures worth €130 billion for the years 2020/2021 helped to curb the losses. Dax dropped 0.5%, CAC 40 fell 0.2% and FTSE 100 finished 0.6% lower. The Euro rose above $1.13 on, the highest since March 12th.

 

US indices are trading mixed today as investors digest latest unemployment claims data and are trying to asses prospects of a global economic recovery.  A report from the Labor Department showed new claims for state unemployment benefits totaled 1.877 million for the week ended May 30, down from 2.126 million in the prior week. However continuing claims rose to 21.48 million, higher than analysts expectations of 20 million and after falling for the first time since the pandemic the week before. That's not a good sign ahead of tomorrow’s Non-Farm Employment Change report. Of course, yesterday's ADP data showed that employment in May fell only by 2.7 million (expected 8 million). Nevertheless, it is worth remembering that the ADP report has had problems in recent months with catching the trend of employment change.
Tomorrow's data from the US labor market will probably show an increase in the unemployment rate to around 20%, and at the end of the year unemployment will probably be around 10%. At the same time, major stock indexes are trading near their historical highs. It is worth mentioning  that the index of key US technology companies referred to as FAANG reached historical highs today. It seems that a huge amount of printed, almost free cash and low interest rates do the job. Most investors seem to be following the market trend, afraid to stay behind.  However at the end of the European session, most of the US indexes fell below yesterday's close. Dow Jones dropped 0.32%, S&P500 lost 0.50% and Nasdaq is trading 0.64% lower.

Gold prices rose on Thursday, however price is still trading within a  range between $1700/oz and $1750/oz. Nonetheless demand for gold still looks strong. According to the World Gold Council, gold-backed ETFs added 154 tons to their holdings in May thanks to net inflows of $8.5 billion. That boosted global holdings to a new all-time high of 3,510 tons.  Meanwhile silver futures rebounded 0.5% to trade just above $18 an ounce again, while platinum futures rose 0.5% to $864.95 an ounce.

There is quite a lot of data scheduled for release tomorrow. Non-Farm Employment Change report will be the key release of the US session and is expected to show significant improvement compare to last month. Apart from that, investors will get to know US Unemployment Rate and Average Hourly Earnings. Last but not least, Employment Change and Unemployment Rate data from Canada will be published.