Skip Header

On 07 June 2019 - Stocks rally on expected Fed easing after weak US jobs report

Anne D Picker

Anne D Picker - Econoday

Markets also hope for US-Mexico deal to avert tariffs.

US markets

US shares advanced Friday as markets priced in near-term Federal Reserve rate cuts after a surprisingly poor showing in the US employment report, with nonfarm jobs up only 75,000, well below expectations centering on a rise of 180,000. 

Equities also drew support from hopes for a settlement in US-Mexico talks intended to avoid US imposition of tariffs on Mexican imports, or at least a delay in the tariffs. President Trump tweeted there was “a good chance” of a deal with Mexico, and other officials said the talks were advancing. There was also favorable response to reports suggesting a possible delay in imposition of tariffs on certain Chinese imports. 

The Dow industrials rose 1.0 percent; the S&P 500 gained 1.0 percent, and the NASDAQ was up 1.7 percent.

Microsoft and Apple, both up about 3 percent, led the gains, along with other big tech firms. Healthcare and Internet shares did well, with Johnson & Johnson up 1.5 percent, and Facebook up 3 percent. Bank stocks lagged, with JP Morgan down about 1 percent.

The May employment report showed declining growth in the labor market and topping pressure for wages. Nonfarm payrolls, with a gain of 75,000, came in below Econoday's forecast range and include a total of 75,000 in downward revisions to April and March. Data on wage inflation were at the bottom of forecast ranges -- only a 0.2 percent monthly increase for average hourly earnings and, in the lowest reading since last September, a slumping 3.1 percent gain for the year-on-year rate.

The dollar weakened on expectations for lower US interest rates. Gold continued its recent strong run; oil advanced, partly in response to bullish comments from the Saudi oil minister, who pledged production cuts.

These data reflect observations at 4:00 PM US ET: Dated Brent spot crude was up US$1.00 to $63.32 while gold was US$5.70 higher at $1,339.00. The US dollar was weaker against most major currencies. The yield on the US Treasury 30-year bond was down 4 basis points to 2.57 percent while the yield on the 10-year note was down 4 basis points at 2.08 percent. 

European markets

European shares rose with US shares in response to the poor US jobs report on hopes for Fed rate cuts. Weak European data earlier contributed to expectations that the ECB, in addition to the Fed, will soon be obliged to ease.

The European STOXX 600 rose 0.9 percent.  The German DAX rose 0.8 percent, the French CAC rose 1.6 percent, and the UK FTSE 100 rose 1.0 percent. 

French pharma Sanofi jumped 4% on news it named Novartis executive Paul Hudson as its new CEO. Other notable movers included Danish biotech Novozymes, which dropped 7 percent after an outlook downgrade, and ASR Nederland, an insurance company, which rose 6 percent.

Weak German data added to expectations the ECB will be obliged to ease. German goods production declined a much larger than expected 1.9 percent, only its first fall since January, but equaling the steepest since August 2014. Annual growth dropped from minus 0.8 percent to minus 1.9 percent.  The German data suggested trade worries were having an impact on German manufacturing. On the positive side, French industrial production (ex-construction) lived up to expectations in April, posting a 0.4 percent monthly advance. The March decline was revised a couple of ticks steeper (1.1 percent) but annual growth still picked up from minus 0.7 percent to 1.1 percent, a 3-month high. 

Asia Pacific Markets

Markets in China and Hong Kong were closed Friday for a local holiday. The Shanghai Composite closed the week down 2.4 percent, while Hong Kong’s Hang Seng index closed up 0.2 percent on the week. Japanese markets were modestly higher Friday with both the Nikkei and the Topix indices closing up 0.5 percent on the day and up 1.4 percent and 1.3 percent respectively on the week. Australia’s All Ordinaries index advanced 0.9 percent on the day and 0.5 percent on the week.

The Asia data calendar was light Friday. Japanese data showed year-on-year growth household spending slowed from 2.1 percent in March to 1.3 percent in April, well below the consensus forecast of 3.0 percent, with a sharp drop in spending on housing the main factor weighing on headline growth. Australian data showed the number of home loans fell 1.2 percent on the month in April, with the value of loans also falling 0.8 percent on the month.

Looking forward

Central Bank activities

Jun-13

Switzerland

SNB Monetary Policy Assessment

The following indicators will be released this week...

Europe

Jun-10

Italy

Industrial Production (April)

 

UK

Industrial Production (April)

 

 

Merchandise Trade (April)

 

 

Monthly GDP (April)

Jun-11

UK

Labour Market Report (May)

Jun-13

EZ

Industrial Production (April)

 

Germany

CPI (May Final)

 

Italy

Unemployment Rate (Q1)

Jun-14

France

CPI (May Final)

Asia Pacific

Jun-10

China

Merchandise Trade (May)

 

Japan

GDP (Q1 Final)

Jun-12

China

CPI (May)

 

 

PPI (May)

 

India

Industrial Production (April)

 

Japan

Machine Orders (April)

 

 

PPI (May)

Jun-13

Australia

Labour Force Survey (May)

Jun-14

China

Fixed Asset Investment (May)

 

 

Industrial Production (May)

 

 

Retail Sales (May)

Americas

Jun-11

US

PPI-FD (May)

Jun-12

US

CPI (May)

 

 

Treasury Budget (May)

Jun-13

US

Import & Export Prices (May)

Jun-14

US

Retail Sales (May)

 

 

Industrial Production (May)

 

 

Consumer Sentiment (May)

Global Stock Markets

 

Index

07 June 2019

Daily Change

% Change Daily

North America

 

 

 

  

United States

Dow

25983.94

263.28

1.0

 

NASDAQ

7742.1

126.55

1.7

 

S&P 500

2873.34

29.85

1.0

Canada

S&P/TSX Comp

16230.96

3.16

0.0

Europe

 

 

 

 

UK

FTSE 100

7331.94

72.09

1.0

France

CAC

5364.05

85.62

1.6

Germany

XETRA DAX

12045.38

92.24

0.8

Italy

MIB

20360.59

182.78

0.9

Spain

Ibex 35

9236.1

66.90

0.7

Sweden

OMX Stockholm 30

1566.14

24.14

1.6

Switzerland

SMI

9749.13

66.84

0.7

Asia/Pacific

 

 

 

 

Australia

All Ordinaries

6525.21

58.81

0.9

Japan

Nikkei 225

20884.71

110.67

0.5

 

Topix

1532.39

7.48

0.5

Hong Kong

Hang Seng

*

*

*

S. Korea

Kospi

2072.33

*

*

Singapore

STI

3166.29

20.11

0.6

China

Shanghai Comp

*

*

*

Taiwan

TAIEX

*

*

*

India

Sensex 30

39615.9

86.18

0.2

*Markets closed

Data Source — Haver Analytics

Note: all releases are listed in local time.

Important Information

Econoday Inc. is a US company that provides financial commentary and indicators to industry professionals. All information provided and views expressed are those of Econoday. Reference in this document to specific securities should not be construed as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. Past performance is not a reliable indicator of future results. The value of investments can go down as well as up and investors may not get back the amount invested.