US equities rose on Thursday with Tre yields declining on expectations the US debt ceiling bill will soon pass the Senate, while investors also await Friday’s non-farm payroll report.
United States
Technology shares help lifted the S&P500 overnight by 0.99% as the technology sector rose 1.33%. The Dow Jones also rose 0.47%, with the technology heavy Nasdaq Composite up 1.28% followed by the Russell 2000 1.05% with the VIX tumbling -12.76% as investors took relief in the likely passing of the debt ceiling. The yield on 2-year Treasuries declined -6.2 basis points to 4.34% trading well below last week’s high of 4.56% as investors now look past the debt ceiling, the yield on the 10-year was also -4.9 basis points lower along with the 30-year yield down by -4.7 basis points, weighing on the US Dollar index which declined -0.73%.
Investors are awaiting tonight’s non-farm payroll data for May expected to show 190k jobs were added over the month with the unemployment rate expected to tick higher to 3.5% from 3.4% in April. Helping drive yields lower overnight, the ISM manufacturing PMI report for May showed the sector remains in contraction with a reading of 46.9, modestly below estimates of 47. In other economic data overnight, initial jobless claims for the week ending May 27th were in line with estimates, rising to 232k while the private ADP employment report was stronger-than-expected adding 278k jobs compared to 170k forecast. There are growing expectations that the Fed will pause rate increases at the June 14th meeting, with Philadelphia Fed President Patrick Harker adding to those views overnight, noting “we should at least skip this meeting in terms of an increase” while markets are pricing a roughly 50% chance of an increase in July.
Europe
European shares also gained on Thursday, with sentiment boosted by weaker-than-expected inflation data, as well as relief over the US debt ceiling and signaling of a pause by Fed officials. The Euro Stoxx 600 rose 0.78% along with the DAX 1.21%, CAC 0.55% and FTSE100 0.59%. Eurozone core inflation for the 12 months to may declined to 5.3% from 5.6% previously, below expectations of 5.5% with headline prices also falling more than expected to 6.1% from 7%. Despite the softer inflation data, the Euro rose 0.68% against the USD on expectations the Fed may be at peak rates while the ECB still has further work to do.
Eurozone Inflation (YoY %)
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is expected to open higher this morning with ASX200 futures up 47 points or 0.66% to 7,172. The index rose 0.27% on Thursday driven by gains in health care 1.16% and consumer staples 0.93% while materials and financials were little changed. Sentiment was lifted somewhat by a private survey of Chinese manufacturing PMI which rose to 50.9 in May from 49.5 in April, contradicting weaker official data earlier this week, while economists had expected little change. The positive data help boosted iron ore by 3%, lifting miners FMG 0.8%, RIO 0.4% and BHP 0.1%. Shares in uranium miner PDN climbed 11% rebounding after a 20% plunge earlier this week saying it was not aware of any proposed legislative changes in Namibia that would impact its stake in the Langer Heinrich mine.
Commodities
Oil prices rebounded overnight with both WTI and Brent crude up 2.95% and 2.31% respectively following heavy falls earlier this week as investors look to an OPEC meeting on June 4th. Iron ore futures are -0.32% lower this morning at US$101.75 after climbing 3.74% on Thursday, with copper also rising 2.03%. Gold is 0.76% higher at US$1,977 an oz, with silver also 1.58% higher while Bitcoin declined -0.92%.
Economic Calendar
2nd June 2023
Australian Home Loans (MoM Apr) 11:30
US Non-farm payrolls (MoM May) 22:30
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
