Originally published by Rivkin Securities
US. equity markets surged to new all-time highs on Thursday spurred by better than anticipated economic data. The private US. ADP employment report showed 253,000 jobs were added during the month of May against forecasts for 180,000. The ADP employment is seen as an indication ahead of tonight’s non-farm payrolls and while the two measures are now always in line, it certainly suggests non-farm payrolls should be relatively in line with the 180,00 forecast. The unemployment rate is tipped to remain steady at 4.4% and a key focus will be on the broader measure of unemployment known as the underemployment rate which also includes those working part-time for economic reasons.
Elsewhere the ISM manufacturing survey (MoM May) edged higher to 54.9 from 54.8 previously with the closely watched sub-index for employment rising to 53.5 from 52. The positive data sent both the S&P 500 and Nasdaq 100 higher by +0.76% and +0.48% respectively to new all-time highs. Treasury yields edged higher with both the two and ten-year yields gaining +2 and +1.5 basis points respectively % boosting the US Dollar Index up by +0.27%. A rate hike at the June 14th meeting seems almost certain, with the implied probability currently sitting around 91% up from 67% one month ago. The probability of a third rate hike by December also edged upwards to 39.2% from 35.5% the day prior.
Oil prices were relatively flat with WTI crude oil up just +0.08% overnight despite a significantly larger than forecast decline in crude oil inventories as it seems the market continues to demand more than an extension of production cuts to send prices higher. For the week ending May 26th U.S. crude inventories dropped 6.428 million barrels compared with estimates for a 3 million barrel decline and gasoline inventories also dropped more than expected, decreasing 2.858 million barrels against estimates for a 1.5 million barrel drop.
Locally the S&P/ASX 200 swung between gains and losses before closing +0.24% higher and this morning we can expect to see an extension of those gains with ASX SPI200 futures up a further +17 points in overnight trading.
Data releases:
· US Unemployment & Wages (MOM May) 10:30pm AEDT
· US Fed’s Harker Speaks On Economy 2:45am AEDT
· US Baker Hughes Rig Count (June 2nd) 3:00am AEDT