Market movers today
- US markets are closed today due to Independence Day yesterday.
- It is a quiet day in terms of economic data releases. Final PMI services are due out across the global markets (but not the US, which are due tomorrow).
- OPEC+ is scheduled to meet again virtually on Monday at 3 p.m. Vienna time to see if the parties can find an agreement to increase production.
The 60 second overview
US labour market: The US labour market generated more than expected jobs in June, as jobs reached 850.000. However, the job generation remains “weak” compared to how high labour demand, which is probably due to the temporary high unemployment benefits and lingering concern about the COVID-19 virus. Yet, jobs growth is increasing and is expected to increase even further into the fall as jobless benefits are lowered latest in early September. US equity markets responded positively to the news, while yields declined. For more on the outlook for asset classes amid a peak in the manufacturing cycle, see Strategy – Peak performance in assets and the end of reflation, 2 July.
OPEC+ crisis: Tensions between UAE and Saudi Arabia intensified over the weekend, with UAE refusing to agree to a deal supported by all other members. UAE wants better terms allowing higher production, while Saudi Arabia is refusing to give in to the demands. If no deal is reached, oil production will likely not increase in August and the remainder of 2021, risking to put further upward pressure on oil price. The oil price passed the USD75 per barrel level on Friday.
Chinese economy: The service PMI index for the Chinese economy fell back sharply in June according to figures released this morning. The index retretated to 50.3 compared with 55.1 last month and 54.9 expected. Asian equity markets did not appear overly concerned about the drop as equity indices are mixed this morning.
Equities: Global equities finished higher as the job report left little impact on market narrative. This meant growth again outperforming value, with tech and consumer discretionary the leaders, pushed higher by solid gains from big tech. Risk appetite there as well, with all sectors but the deep value-plays, financials and energy. Implied volatility ticked down to year-lows (VIX around 15). Big preference for large caps with S&P500 and Nasdaq gaining 0.8%, Dow 0.5% but Russell 2000 heavily underperforming down -1%. Mixed movements in Asia this morning with value-intense Japan underperforming while US markets will be closed for holiday.
FI: US government bond yields continue to decline and the 10Y US government bond yield is testing the 1.4%-level despite the decent US labour market report released on Friday and the recent rise in oil prices.
FX: EUR/USD was largely unchanged as payrolls were good but not exceptionally so, Friday. USD/JPY has climbed to in to the 110’s on the back of a strong dollar and rising oil prices.
Credit: CDS indices continued to perform on Friday where iTraxx Xover tightened almost 3bp (closing in 227bp) and Main ½bp (to 45½bp). HY bonds were under slight pressure and widened 2bp while IG was unchanged