Market movers today
Today, PMI services indices for May are due out in a number of countries (Sweden 08:30 CEST, Spain 09.15 CEST, Italy 09:45 CEST, US ISM non-manufacturing 16:00 CEST). Chinese Caixin PMI services already released this morning rebounded to the highest level since October 2010 and standing at 55.0 are now back in expansion territory. We still see a fair chance that most advanced economies will see a similar rebound in a couple of months’ time (see The Big Picture: Reopening, recovery and risks, 2 June).
Unemployment data for Germany (May) and the euro area (April) will also be released. As we argued in Euro Area Research: The road to recovery, 14 May, labour market dynamics will be an important determinant for the depth and duration of the current crisis. So far job losses in Europe have stayed more muted than the US, not least thanks to short-time working schemes. Today’s figures will show whether that dynamic has changed.
In the US, the ADP jobs report for May is due out. While the ADP jobs report is not considered a good indicator for non-farm payrolls on Friday, we are in no doubt it will show a big drop in employment in May.
Germany’s government will continue negotiations on the details of its new recovery stimulus package, after nine hours of talks did not result in a breakthrough yesterday. A range of initiatives are on the table, including debt relief for struggling municipalities, cash bonuses to stimulate car sales and aid for families with children. The package could amount up to EUR100bn according to media reports, which comes on top of the EUR750bn coronavirus emergency package already deployed in March.
In Denmark, FX reserve figures for May are published today at 17:00 CEST. We believe focus will not be on whether Danmarks Nationalbank has intervened in the currency markets but instead on whether the government has increased or decreased its foreign debt. The government raised loans abroad for DKK89bn in March and April – loans that can help finance the major deficit this year.
Selected market news
Unrests continued to rock US cities even after President Trump vowed to deploy the military to quell protests. So far Trump’s decision has not undermined the positive market narrative of recent weeks, as governments and central bankers keep the stimulus tabs open, but there is a risk that COVID-19 could spread among large groups of protesters, leading to a second wave of infections. The rally on Wall Street drove S&P 500 to the highest since early March and US futures signal more gains ahead for today’s session. Brent oil rose above USD40/bbl for the first time in three months, helped by constructive risk sentiment and possible further OPEC output cuts. Details on the ECB’s PEPP portfolio released yesterday showed it broadly following the capital key, although there was an overweight on Italian government purchases that was countered by an underweight in France (see fixed income section).
