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Top 5 Things to Know in the Market on Friday, June 5th

EconomyJun 05, 2020 06:43AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- The U.S. will release its official labor market report for May, and there is a clear risk of an upside surprise after ADP’s better-than-expected numbers on Wednesday (even if that was neutered, in turn, by yesterday’s jobless claims figures). Brent oil futures are back above $41 after reports of a breakthrough in talks with overproducers. The ECB’s latest booster shot of stimulus is driving bond spreads down and stocks up, while underwhelming reports from Broadcom (NASDAQ:AVGO) and Slack may weigh on tech stocks. Here’s what you need to know in financial markets on Friday, June 5th.

1. It's payrolls day.

The third of this week’s updates from the U.S. labor market arrives at 8:30 AM ET with the publication of the Labor Department’s monthly report. Nonfarm payrolls are expected to have fallen by 8 million in the month to mid-May, a gentler drop than the 20.5 million seen in April but still a number that points to immeasurable hardship across the country. The jobless rate is expected to rise to a postwar high of 19.7%.

The risk is for an upside surprise – ADP’s assessment of private payrolls on Wednesday suggested a much gentler decline of barely 2 million. However, the  latest instalment of weekly jobless claims numbers on Thursday was a reminder that the trend is turning more slowly than politicians – and stock markets – would like to believe.

2. Euro, Stoxx hit three-month highs after ECB action

European assets are enjoying their moment in the sun, after the European Central Bank padded its emergency bond-buying fund by another 600 billion euros ($680 billion) at its meeting on Thursday.

The euro earlier hit $1.1384, its highest level against the dollar since March 10, but is consolidating now after rallying for 10 days straight since the European Commission announced its own 750 billion program aimed at helping the EU economy recover next year.

Sovereign yield spreads have tightened to their narrowest since March in the wake of the dual initiative by Brussels and Frankfurt, something that is allowing chronically beaten-down bank stocks to lead the current rally.

Earlier Thursday, the German Bundesbank said the stimulus package announced by Berlin on Wednesday would soften the economy’s contraction this year by over 1% of GDP. It still expects a decline of over 7% for 2020, while the ECB sees the euro zone shrinking by 8.7%.

3. OPEC-Russia agrees in principle on deal extension

Crude oil prices jumped again as the so-called OPEC+ group of producers agreed in principle to extend the current level of output restraint by one month, that is, until the end of July.

The group will meet virtually on Saturday to rubber-stamp the agreement, which came after Iraq and Nigeria agreed to improve their compliance with the deal agreed in April at the depths of the collapse in global demand.

By 6:30 AM ET, U.S. crude futures were up 2.2% at $38.24 a barrel, while the global benchmark Brent was up 3.0% at $41.20 a barrel, the first time it’s been above $41 since March 7.

4. Stocks set to open higher on oil news

U.S. stock markets are set to open higher, having turned positive on the back of the news coming out of OPEC. That would cap a remarkably resilient week for stocks, which are now close to recovering pre-pandemic levels as stimulus money continues to find its way into financial assets.

By 6:30 AM (1030 GMT), the Dow Jones 30 futures contract was up 283 points or 1.1%, while the S&P 500 futures contract was up 0.7% and the Nasdaq 100 futures contract was up 0.3%.

The dollar index, by contrast, appeared to be bottoming out around 96.8 after losing 1.8% over the course of the week, while gold futures were down 1.1% at $1,708.30 a troy ounce.

5. Slack, Broadcom put a question mark over tech valuations

A note of caution could be seen in tech stocks this morning after two disappointing updates from prominent names after the bell on Thursday.

Chipmaker Broadcom warned that it expected the next couple of quarters to be overshadowed by supply chain constraints and a “substantial reset in wireless”, also hinting that it expects the launch of the next generation of iPhones (for which it makes chips) to be delayed.

Separately, messaging service Slack said it had failed to register any acceleration in revenue growth in the last three months, despite perceptions that it was well positioned to profit from the boom in remote working.  Slack’s figures stood in sharp contrast to those released by Zoom Video earlier in the week.

In lighter vein, Tesla (NASDAQ:TSLA) founder Elon Musk called for Amazon.com (NASDAQ:AMZN) to be broken up after it restricted distribution of a book on the Covid-19 pandemic. 

Top 5 Things to Know in the Market on Friday, June 5th
 

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Comments (12)
AsianRey Dimaano
AsianRey Dimaano Jun 05, 2020 10:52AM ET
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its so steep that i cant go to sleep.
Joanna Yin
Joanna Yin Jun 05, 2020 8:01AM ET
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Data not matter at all. "hope" and "pump" are two main driving factors on stock market. We have a dream, now we are in the dream. ~ not Martin Luther King's dream.
Andre Lins
Andre Lins Jun 05, 2020 7:58AM ET
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Noel, are you brazilian? How could you say that We are not defending our economy? The president and Paulo Guedes have cut the interest rate to the lowest historical point ever, also the government has injected more than BRL 1 trillion in the economy, of this amount, approximately BRL 250 billion to the low income people. Our country is also a consumist country, as the states. What do you think will happen with these two facts brought together at the same time? Nevertheless Brazil is not doing the most stupid thing the ``developed`` economies are doing, the so-called Quantitative Easing, as our minister of economy is not a donkey.
Sean Livingstone
Sean Livingstone Jun 05, 2020 7:20AM ET
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I agree with all. You can't do so many trillions to pump the market, throw trillions st companies, people and even buy your own stock market. You might as well just stop the stock market and give it to the fed to decide what stock price it wants since printing money is unlimited?
Sam Crowther
Sam Crowther Jun 05, 2020 7:20AM ET
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What exactly do you think tbe FRB is in place to do? They arent there to just do nothing. Smh
Sean Livingstone
Sean Livingstone Jun 05, 2020 7:20AM ET
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Sam Crowther  not buying your own stock market. You would just set a price on the market or stop it from trading. Stock market should be free, and supporting the main street and companies would have supported the stock market. The result of supporting the stock market has resulted in an artificially high stock market, and you know the end result of an artificially overvalued stock market.
Neeraj Bapat
Neeraj Bapat Jun 05, 2020 7:19AM ET
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gold and silver are on their way up while as the dollar and the Dow both will be battered down in the next couple of years
Be So
Be So Jun 05, 2020 7:04AM ET
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This will not end well. Too high too fast!
Alexander Yoder
Alexander Yoder Jun 05, 2020 7:04AM ET
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I completely agree. I wake up to the headline of jobless claims worst since post war era and the futures are up big. Everyone just shrugging off that Cali is seeing infection spreading after memorial day. We are less than 10% off the highs and the economy is shuttering!
Ring Zoon
Ring Zoon Jun 05, 2020 7:01AM ET
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I think gold will go up
Tunde Arowolo
Tunde Arowolo Jun 05, 2020 7:01AM ET
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not really gold is a safe haven asset and there the market is optimistic today
Michael King
Michael King Jun 05, 2020 7:01AM ET
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FED unlimited borrowing from future is determined to put our kids and the country in serious financial trouble. How the economy ignorance Powell get such an critical job. This guy should resign right away.
Bob Flippa
Bob Flippa Jun 05, 2020 6:58AM ET
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20% jobless= ATH, lol. trumps and feds dirty paws all over this.
Ring Zoon
Ring Zoon Jun 05, 2020 6:57AM ET
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What will become of gold? Will gold go further up or down?
Iafeta Faapusa
Iafeta Faapusa Jun 05, 2020 6:52AM ET
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What does this mean for GBP/USD?
Noel Amparo
Noel Amparo Jun 05, 2020 6:49AM ET
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All we need to know in the market is FED and ECB free money. Evidence that markets are expensive is emerging markets have no choice but to only keep going up as well despite not having such stimulus in their respective economies. FOMO at its best.
Umut Saglam
Umut Saglam Jun 05, 2020 6:49AM ET
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It's far more than fed money now. Every business starts to run again like pre corona. Sales are increasing, oil consumption, beer etc. It's all linked to each other. Just go with flow and profit. Don't be gay bear that only thinks about shorting/puts lol
Tasadduq Ali
Tasadduq Ali Jun 05, 2020 6:49AM ET
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What about gold can go up or down
 
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