Europe
European markets have got off to a positive start for June, helped by a continuation of the recent theme of an improving economic environment.
Positive manufacturing reports from across Europe and the UK has seen a buoyant tone throughout the day, with another record high for the FTSE 250.
Amongst the worst performers Mediclinic (LON:MDCM) has slid back after being downgraded by Credit Suisse (SIX:CSGN), while ITV (LON:ITV) has also come under pressure after being cut to “hold” by HSBC.
House builder Taylor Wimpey (LON:TW) is also sharply lower after going ex-dividend.
On the plus side, Rolls Royce (LON:RR) is higher after winning a new marine contract to supply gas engines to Norwegian ferry operator Torghatten Nord.
US
US markets opened higher, with another record high for the NASDAQ after a bumper payrolls report from ADP for the month of May, saw 253k new jobs added, well above expectations of 177k, while weekly jobless claims edged up to 248k.
In company news security provider Palo Alto Networks (NYSE:PANW) appears to have reaped the benefits of the recent “Wannacry” cyber-attack by posting profits and revenues above expectations. The company also added new customers to record highs.
Hewlett Packard (NYSE:HPQ) also posted some decent numbers, meeting expectations on quarterly profits, though its revenues were impacted by a stronger US dollar.
The manufacturing sector in the US also expanded in May, however the growth was significantly weaker than the levels seen in the UK and Europe, coming in at 52.7, while the ISM manufacturing survey improved slightly to 54.9.
FX
A disappointing Caixin manufacturing PMI report from China along with continued weakness in metals prices has seen the Australian dollar remain under pressure with nickel and Iron ore prices declining further. Nickel prices have slid to 11 month lows while iron ore prices have also slid back again to within sight of the October lows.
The US dollar got a significant uplift after a bumper ADP payrolls report for May which showed that 253k new jobs were added, with most of them in the services sector. As a bellwether for tomorrow’s official payrolls report it could well rubber stamp the prospect of a move in June, but also raise expectations of a further hike as soon as September. The main puzzle for a lot of people given the number of jobs being added is the weak nature of wage growth which still remains lacklustre.
The pound has managed to hold up fairly well despite another poll showing a narrow lead for the Conservative party, as the focus returns to the UK economy. Another decent manufacturing report for the month of May saw decent gains in new orders as well as employment. Rising prices remained a concern but they also showed further signs of easing back.
Commodities
Today’s announcement by OPEC secretary general Barkindo that the current output deal which was extended last week, could be extended even further doesn’t appear to have cut much ice with oil traders, who still appear to be of the opinion that the increased output from countries like Libya and Nigeria, who aren’t included in the curbs, are likely to more than offset the types of draws that we saw overnight from API.
Even with the curbs, output is still expected to hit record levels of 10m barrels a day by the end of this year, while OPEC oil exports also rose despite compliance with the cuts.
This is particularly pertinent at a time when US shale producers continue to add to rig counts on a consistently weekly basis.
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