By Geoffrey Smith
Investing.com -- Global markets rally and the dollar eases as the wave of protests in the U.S. loses some intensity, and data point to the world economy bottoming out. ADP will report its hiring data for May, while oil prices hit a three-month high on hopes for an extension of OPEC-led output restraint. And teleconference company Zoom Video lives up to the hype with its quarterly results. Here's what you need to know in financial markets on Wednesday, June 3rd.
1. Markets rally, dollar eases on recovery hopes, quieter protests
Global markets rallied as some of the heat went out of the protests in the U.S., allowing investors to focus again on the pace of economic reopening.
By 6:30 AM ET, the Dow Jones 30 futures contract was up 0.7% and closing in on the 26,000 level for the first time since March, while the S&P 500 futures contract was up another 0.5% at just under 3,100. The Nasdaq 100 futures contract was up 0.4%.
The appetite for risk was also visible in foreign exfchange markets, where the dollar index fell to its lowest in nearly three months, due largely to gains by the euro and sterling. Money is also flooding out of the dollar and into emerging currencies, with the Russian ruble, Indonesian rupiah, and Mexican and Chilean pesos all gaining more than 3% against it in the last week.
2. Surveys show economic improvement in May in China, Europe
Economic data from the developed world still looks grim, although higher-frequency releases continue to strengthen hopes that the economy has bottomed. That contributed to another blow-out 10-year government bond auction in Italy, which attracted 85 billion euros in bids.
European purchasing manager indices released earlier confirmed a modest bounce from April’s lows, although they remained deep in contraction territory.
China’s Caixin services PMI, however, returned to signalling growth, with an index reading of 55. At the same time, Australia’s economy – often seen as a rough proxy for Chinese demand -- confirmed it had fallen into recession for the first time in 30 years with a second straight contraction in the first quarter.
3. ADP (NASDAQ:ADP) to release private payrolls survey; factory orders data also due
Payrolls processor ADP will release its monthly report on hiring in the U.S. economy at 8:15 AM ET. Analysts expect the economy to have shed another 9 million jobs through the middle of May, after a disastrous April in which over 20 million jobs were lost.
The numbers come a day ahead of the more closely-watched weekly data for jobless claims, and the official government labor market report for May on Friday.
Before then, there will be weekly numbers for mortgage applications, and later in the day, there will also by the May ISM non-manufacturing survey and factory goods orders data for April.
4. Zoom lives up to the hype
Zoom Video Communications (NASDAQ:ZM), the teleconferencing company that has come to symbolize the structural changes being forced upon the economy by the Covid-19 virus, lived up to its hype with its first-quarter results after the bell on Wednesday.
The company reported revenue rose 169% from a year earlier, while net profit was $27 million, rather than the $2 million expected. Its top-tier premium customer numbers rose by 90%, while total paying customers rose four times.
The only fly in the ointment was a drop in the company’s gross margin due to higher costs for all the data it needs. Margins fell from 80% to just under 70%, still respectable by the standards of the times.
Zoom Video stock rose 0.2% in premarket trading, having risen some 25% in the last week to value the company at $59 billion.
5. London oil futures back at $40 on hopes for extended output cuts
Crude oil prices hit their highest in three months as speculation strengthened that OPEC, Russia and other major exporters will extend their current deal on output restraint for another three months, rather than starting to taper it as originally envisaged.
The current deal takes 9.7 million barrels a day in output off world markets, but that number was supposed to ease to 7.7 million at the end of the month through the end of the year.
Algeria, which holds OPEC’s rotating presidency, has proposed moving up a meeting planned for next week to this Thursday. However, newswire reports suggest opposition from Russia and others, due to suspicions that some signatories are already producing above their quotas.
U.S. crude prices rose 0.1% to $36.84 a barrel, while Brent Futures rose as high as $40.52 a barrel before falling back to trade at $39.39.
The U.S. releases official crude inventory data at 10:30 AM ET. The American Petroleum Institute’s data on Tuesday indicated a slight draw in stocks last week.