The day after Trump pulled out of the Paris Climate Accord, stocks are set for new all time highs with S&P futures up 0.2%, boosted by green markets across Europe and Asia, where the Nikkei rose above 20,000 for the first time since 2015. World stocks are set for new record highs, having already gained 11% so far this year, ahead of today's US nonfarm payrolls which are expected to increase by 185,000 jobs after surging 211,000 in April. In Asia, the MSCI Asia Pacific Index climbed 0.9% to the highest since April 2015. The Nikkei 225 Stock Average rallied 1.6% and topped 20,000 for the first time since December 2015. Stocks in Europe joined the party with euro zone blue-chips up 0.6% and UK's FTSE 100 up 0.4% and hovering near its highest-ever levels. Futures on the S&P 500 rose 0.2%. The S&P 500, the Nasdaq Composite and Nasdaq 100 indexes each closed at fresh records on Thursday. The dollar has clawed back some of recent losses after coming off its worst fortnight in a year on concern about the Trump administration's ability to deliver a substantial boost to growth...
After the recent Chinese currency fireworks, which saw the biggest 4-day rally in the Yuan in 12 years, China’s offshore yuan tumbled the most since February amid signs that the recent funding crunch is beginning to abate and that the PBOC may have found a new equilibrium level for the currency. The onshore currency slipped 0.2 percent, breaking a four-day rally, while the offshore yuan tumbled 0.6% to 6.7930 per dollar, although it was still set for weekly gain of 0.5%. Separately, the offshore yuan overnight Hibor overnight rate declined 34.14% points, the most since January, to 8.68%. It rose more than 35% points on Wednesday and Thursday as the PBOC set off to crush yuan bears. Additionally, the CNH overnight deposit rate dropped for the first time in three days, down 21 percentage points to 2%, while CNH tomorrow- next forward points decline 60 to 5 as the offshore market has stabilized.
In other currencies, the British pound dropped 0.1 percent to $1.2869, while the euro edged higher by 0.1 percent to $1.1221. The yen slipped 0.1 percent to 111.45 per dollar, after falling 0.5 percent on Thursday. The Bloomberg Dollar Spot Index added 0.1 percent, extending a 0.2 percent advance in the previous session.
"The move this morning is in dollar yen," said Sweden's Nordea Bank. "Good numbers yesterday and the record highs in equities if anything are dollar positive. The data hasn't done a great deal for the dollar recently, but we'll certainly be looking at the wage numbers today, that is crucial for inflation and the rate outlook."
Even as stocks pushed on into record territory, oil prices resumed their slide with key futures contracts down more than 2 percent amid worries that Donald Trump's decision to abandon a global climate pact could spark more crude drilling in the United States, stoking a persistent glut in global supply. Brent fell to $49.63 a barrel, while WTI dropping below $47, and set for the biggest weekly drop since May 5, while industrial metals including copper declined, driving the Bloomberg Commodity Index to the lowest in more than a year.
All eyes will be on today's payrolls report: data showing a healthy uptick in private sector hiring and factory activity during May bolstered expectations that the U.S. economy was picking up speed and lifted stocks on Wall Street after two days of losses.
*) Bulletin Headline Summary;
- Oil bears have sparked some volatility into a historically dull NFP Friday. WTI and Brent Crude futures both trade near session lows
- Not too much FX price action this morning, as one would expect ahead of the non farm payrolls release this afternoon
- Looking ahead, highlights include US jobs report, Fed's Harker and Kaplan
*) Market Snapshot;
- S&P 500 futures up 0.2% to 2,433.25
- STOXX Europe 600 up 0.6% to 393.83
- Nikkei up 1.6% to 20,177.28
- Topix up 1.6% to 1,612.20
- Hang Seng Index up 0.4% to 25,924.05
- Shanghai Composite up 0.09% to 3,105.54
- Gold spot down 0.3% to $1,262.41
- U.S. Dollar Index unchanged at 97.20
- German 10Y yield fell 1.3 bps to 0.292%
- Euro up 0.1% to 1.1224 per US$
- Brent Futures down 2% to $49.64/bbl
- Italian 10Y yield rose 5.3 bps to 1.962%
- Spanish 10Y yield fell 2.9 bps to 1.534%
*) Top Overnight News from Bloomberg;
- Trump’s Paris Exit Leaves Him Isolated From C-Suites to Capitals
- Glaxo Submits First 2-Drug HIV Regimen to FDA, EMA
- JPMorgan’s Dimon Says ‘Absolutely Disagree’ on Paris Withdrawal
- Blue Apron Gets Ready to Prove Food-Delivery Chops on IPO Trail
- Citigroup Names Munir Nanji Global Subsidiaries Head for APAC
- PennTex Committe Recommends Unitholders to Accept ETP’s Offer
- Lehman Brothers Moves Closer to Resolving Mortgage Claims
- International Shipholding Receives Reorganization Plan Approvals
- KBL Merger IV Reports Pricing of IPO at $10 a Unit
- General Motors: End of Operations in Venezuela ‘Irreversible’
- Cook Says He Tried to Persuade Trump to Remain in Paris Accord
- U.S. Gas Exports to Mexico Down Amid Kinder NGPL Force Majeure
- Cardinal Energy to Buy Assets From Apache for C$330m in Cash
- Goldman’s Blankfein: Climate Decision ‘Setback for Environment’
- Cliffs CEO Praises Trump on Paris Climate Accord Withdrawal
- Charter Financial to Buy Resurgens Bancorp for About $26.3m
- Broadcom Indicates Ramp for New IPhone Slower Than in Past
*) Asia stock markets traded mostly higher following the positive lead from US, where all 3 major indices printed fresh record highs amid encouraging data including better than expected ADP jobs figures. This spurred momentum in the ASX 200 (+0.9%) and Nikkei 225 (+1.6%), with the latter also underpinned by a weaker currency to break above 20,000 for the 1st time since 2015. Chinese markets were mixed as the Hang Seng (+0.4%) conformed to the upbeat tone, while the Shanghai Comp. (+0.1%) lagged after a weaker daily liquidity operation and tighter conditions from the recent surges in money market rates. 10yr JGBs were flat with a lack of demand seen amid gains in riskier assets, although downside was stemmed following a firm Rinban announcement in which the BoJ were in the market for JPY 1 .13tln in government debt with maturities of 10yr and under. PBoC injected CNY 30bIn in 7-day reverse repos and CNY 20bIn in 14-day reverse repos, for a net weekly injection of CNY 30bIn vs. Prev. CNY 30bIn drain last week.
# Top Asian News;
- Chinese Firm Buys 253-Year-Old French Crystal Maker Baccarat
- Nikkei 225 Tops 20,000 as Investors Take Second Look at Japan
- India Tea Exports Seen Climbing as Drought Hurts Top Shipper
- Copper Traders Most Bearish in a Year on Signs of China Slowdown
- Steel Tycoon Mulls Foray Into Indian Non-Bank Finance Sector
- Some Bond Buyers Say Thanks for Indonesia Upgrade, Now Adieu
*) In Europe, oil bears sparked some volatility into a historically dull NFP Friday. WTI and Brent Crude futures both trade near session lows, down around a dollar on the session, as an aftermath from the United States' withdrawal of the Paris Accord has been evident. An increase in US shale oil production could counteract attempts from OPEC and Russia to stabilize prices, with some touting that the US could add up to 1.5mln BPD to global oil production in 2018. The oil selling has resulted in Energy to lag, and the only S&P European sector to trade in the red, down around 0.50%. The financial sector leads European bourses to trade in the green, with the likes of RBS, Deutsche Bank, Credit Agricole and CS all leading their respective indices. Strong UK Construction PM! data failed to add to the risk sentiment, with traders seemingly brushing off the large beat seen in the figure, as no immediate bullish pressure was seen in the FTSE nor GBP. The risk appetite seen in equity markets has failed to faze fixed income markets, as subdued trade has been clear as we approach today's NFP report. The Bund future found bids above 162.10, following the gap seen in the futures open, now trading up around 14 ticks on the session, looking towards the gap seen on 21st April..
# Top European News;
- U.K. Housing Lifts Construction Growth to Strongest Since 2015
- Bank of Russia May Raise GDP Forecast in June, Nabiullina Says
- Evonik New CEO Raises Profit Target, Pledges to Rejig Portfolio
- Renewed OPEC Deal Paradoxically Locked in Oil Slump: Rosneft CEO
- May Considers Replacing Brexit Secretary after Election: Times
- Blankfein Tweets, Iger Quits Trump Council in Climate Fury
- SocGen Sees More Upside for European Stocks on Fundamentals
# In currencies, there has been not too much FX price action this morning, as one would expect ahead of the non farm payrolls release this afternoon. What we have seen is largely reflective of the moves seen in the commodity markets, and to that end, the CAD has been suffering as WTI falls to USD47.00 on the implications on US shale production from the US exit from the Paris Climate Agreement. USD/CAD has tested 1.3550, but as we noted first thing, we see strong resistance into 1.3600, some consolidation seen since. EUR/USD continues to hold the low 1.1200's, as dip buyers are keen not to miss out on the ECB QE taper move, some anticipating a signal next week. 1.1150-60 is initial support lower down should be break 1.1200. USD/JPY continues to hold the mid 111.00's, as a positive US jobs report will spur a move on 112.00 again.
# In commodities, across the board, we see losses in most commodities this morning, with focus on Oil once again as the production levels of US Shale dominate the headlines, and exacerbated by the US announcement to withdraw from the Paris Climate Agreement, effectively freeing their hand on output levels. WTI losses have now extended into the low USD47.00's, and momentum has taken Brent back under USD50.00, undermining the attempts by OPEC/non-OPEC week to contain price weakness. Support levels in Light Texas come in around USD46.00-45.0, but the mood has soured significantly, and selling is relentless. This may have contributed to the weakness elsewhere, but metals/iron ore losses are largely based on Chinese demand, and this is back in question after some soft PMI releases. Copper is back under USD2.55, with losses matched in Zinc, while Nickel extends the sell-off through USD9000 to over USD250. This may turn the risk mood sour again, but as yet, little pick up seen in Gold.
# Looking at the day ahead, unsurprisingly the focus for today will come this afternoon with the May employment report. As well as payrolls it’s also worth keeping an eye on the unemployment rate (expected to hold steady at 4.4%) and average hourly earnings (expected to rise +0.2% mom and +2.6% yoy). Away from the employment report we’ll also get the April trade balance reading. Away from the data we’ve got the Fed’s Harker and Kaplan both scheduled to speak....