The Friday Market Minute
- US stocks hold gains after weaker-than-expected May jobs report boosts bets on multiple Fed rate cuts.
- US employers added 75,000 net jobs last month, while average hourly wage growth slowed to 0.2% and the headline unemployment rate held at 3.6%.
- Vice President Mike Pence calls negotiations with Mexico "encouraging" and says they will continue as investors hope fresh tariffs, slated to be applied from June 10, can be avoided.
- European stocks book solid gains despite a sharp reduction in Germany's GDP forecast following notably weak export and industrial production data, as investors bet on a faster response from the ECB.
- Global oil prices rise for a third straight day amid comments that suggest OPEC and Russia may have agreed a way forward that could extend the cartel's production cuts.
U.S. stocks held gains Friday after a report showed U.S. employers added far fewer jobs than economists had forecast, cementing the case for future rate cuts from the Federal Reserve but also raising concerns over the near-term fate of the world's biggest economy.
The Bureau of Labor Statistics said non-farm payrolls grew by 75,000 last month, well shy of the 185,000 forecast. Average hourly wages were pegged at a month-on-month pace of 0.2% while the headline unemployment rate was unchanged at 3.6%.
CME Group futures suggest a 65% chance of three rate cuts between now and the end of the year, following the weaker-than-expected BLS data, with benchmark 10-year Treasury notes rallying to a fresh September 2017 low of 2.06%.
Reports of a potential breakthrough in talks between U.S. and Mexican officials yesterday in Washington helped Wall Street edge higher in the final hours of trading, with Vice President Mike Pence calling the second day of meetings ""encouraging" and describing "some movement on their part" from the Mexican side.
U.S. equity futures are indicated solid opening bell gains, with contracts tied to the Dow Jones Industrial Average suggesting an 80 point gain and those linked to the S&P 500 guiding to a 12.8 point bump higher for the broader benchmark.
Zoom Video Communications (ZM) - Get Report shares were a notable early mover, surging 14.5% in pre-market trading after the web conferencing platform group posted stronger-than-expected first quarter profits in its first-ever report as a public company.
Elsewhere, however, further signs of an economic slowdown continue to build, with Germany reporting a staggering 3.7% plunge in April exports, the most in nearly four years, alongside a 1.9% contraction in industrial output.
The figures were grim enough for the country's central bank, the Bundesbank, to slash its 2019 GDP forecast in half, to just 0.6%, less than 24 hours after the European Central Bank had actually increased its own regional growth estimate to 1.2%.
European stocks, however, were solidly higher at the opening bell Friday, as investors bet the economic weakness would stir the ECB into a faster course of monetary easing following yesterday's comments from soon-to-be-outing President Mario Dragi that the Bank had room for both rate cuts and the resumption of quantitative easing.
The Stoxx 600 benchmark added 0.88% by mid-day of trading in Frankfurt, while the euro eased modestly to 1.1264 against the U.S. dollar and benchmark 10-year bund yields traded at a record low of -0.231%.
Stocks in China, however, were unable to follow the global market path of extending gains in the wake of easing signals from the central bank, with both the Shanghai Composite and the CSI 300 sliding firmly into the red despite comments from PBOC Yi Gang that the Bank has "tremendous" monetary policy space.
"We have plenty of room in interest rates, we have plenty of room in required reserve ratio rate, and also for the fiscal, monetary policy toolkit," Yi told Bloomberg News in an interview where he also hinted at allowing the yuan to drift below the 7 mark against the U.S. dollar if the trade war were to accelerate further.
The dollar, in fact, is on pace for its worst week in three months Friday, as it fell 0.44% against a basket of global currencies following the jobs data.
Global oil prices also continued to take advantage of a weaker U.S. dollar, rising for a third straight day from this week's bear market lows on comment from Saudi Energy Minister Khalid al-Falih that suggested OPEC members and their allies in Russia had agreed a deal that could extend production cuts well into the second half of the year.
Brent crude contracts for August delivery, the new global benchmark, were seen 59 cents higher from from their Thursday close in New York and changing hands at $62.26 per barrel while WTI contracts for the July were marked 52 cents higher at $53.11 per barrel.