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AMC Rally, Jobless Claims and David Beckham - What's Moving Markets

EconomyJun 03, 2021 10:47
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 By Peter Nurse -- AMC Entertainment continues to post staggering stock gains. However, crude oil and Wall Street have paused recent positive runs ahead of a data deluge, headed by U.S. jobless claims numbers. Meanwhile, the electric car market has received a celebrity backer. Here's what's moving markets on Thursday, June 3rd.

1. Onward and upward for AMC Entertainment 

There appears to be no stopping AMC Entertainment (NYSE:AMC).The stock of the movie-theatre chain, the new darling of the Reddit community, is pointing firmly higher again premarket Thursday, after doubling in value during Wednesday’s session and surging more than 400% in the last two weeks alone.

Its market capitalisation has soared to $33 billion during this period, surpassing other so-called meme stocks - not bad for a company that was on the brink of bankruptcy at the start of the year.

However, handing out treats like popcorn and special screenings hasn’t changed the economic reality surrounding the company. 

The pandemic has caused its long-term debt levels to soar to $5.4 billion as of the first three months of this year from less than $2 billion in 2016. And it’s still losing money, with analysts expecting another $100 million to go over the next 12 months.

Sure customers may well come back as the U.S. fully reopens, and its new AMC Investor Connect initiative may help on the margin, but there’s good reason to think the pandemic has permanently changed viewing habits. The media giants spending vast sums on buying streaming services certainly think so.

AMC’s stunning climb has certainly rewarded investors who bought in early, but how long can this last?

2. Stocks to edge lower

U.S. stocks are set to open marginally lower Thursday, continuing the muted start to the new month, ahead of a deluge of important economic data.

By 6:30 AM ET, Dow Jones futures were down 60 points, or 0.2%, at just over 34,500, S&P 500 futures were 0.2% lower and Nasdaq 100 futures dropped 0.2%.

The major indices closed marginally higher Tuesday--with the broad-based S&P 500 up just 0.1%, the blue chip Dow Jones Industrial Average gaining just 25 points, and the tech-heavy Nasdaq Composite adding 0.1%--maintaining the week’s holding pattern ahead of Friday’s crucial jobs report.

These averages remain close to record highs but the market has lost a lot of its earlier momentum amid worries that a stronger-than-expected economic rebound will result in higher inflation and thus sooner-than-expected monetary policy tightening.

Companies like online office tool DocuSign (NASDAQ:DOCU), group messaging app Slack Technologies (NYSE:WORK), athleisure wear maker Lululemon Athletica (NASDAQ:LULU) and chipmaker Broadcom (NASDAQ:AVGO) are due to report Thursday. But a lot of the attention will be on the meme-stocks, like AMC Entertainment (see above), Bed Bath & Beyond (NASDAQ:BBBY) and Workhorse (NASDAQ:WKHS), which continue to pound higher.

3. Data deluge

The U.S. economic slate is packed Thursday, providing investors with fresh clues on the pace of recovery in the world's largest economy, as well as signs of higher inflation at a time when investors are worried about an early tightening of monetary policy.

First off the blocks is the ADP jobs number, at 8:15 AM ET (1315 GMT), which is expected to say the economy added 650,000 private sector jobs in May, a slight slowdown from the 742,000 which were added in April. 

The weekly initial jobless claims data follows 15 minutes later, with expectations calling for a number of 390,000 claims for the week ending May 28, an improvement from the 406,000 the previous week and a new post-pandemic low.

These numbers will be studied carefully ahead of Friday’s official employment report, particularly after the disappointing April release of 266,000 nonfarm payrolls.

“We expect [the] … payroll numbers to be much stronger than in April, with the drop in initial claims indicating a monthly increase of possibly as much as 1.5-2 million (current consensus is for 672k),” said analysts at Nordea, in a note.

Also due for release is the May ISM non-manufacturing PMI, at 10 AM ET, which is expected to show renewed confidence in the vital services sector, but could also indicate rising wages pressure. 

The news from Europe was positive, as business activity in the Eurozone surged in May as the easing of some coronavirus related restrictions injected life into the bloc's dominant services industry.

Additionally, Britain's services sector recorded the biggest jump in activity in 24 years last month, after pubs and restaurants were allowed to resume serving customers indoors following months of lockdown.

4. Crude takes a breather

Crude oil prices edged lower Thursday, with traders banking some gains with the market earlier climbing to record levels amid growing optimism of a strong recovery in demand from China, the U.S. and Europe.

By 6:2 0AM ET, U.S. crude was down 0.2% at $68.69 a barrel, after earlier climbing to its highest level since October 2018. Brent was down 0.2% at $71.22, after closing above $70 for two consecutive days for the first time in more than two years.

Confidence is flooding into the oil market that demand will surge in the second half of the year as the major oil consuming nations fully reopen as they gain control of the Covid-19 pandemic.

Earlier this week, Saudi Energy Minister Prince Abdulaziz bin Salman said the demand picture has shown signs of improvement, in the wake of the meeting of the Organization of the Petroleum Exporting Countries and other top producers, including Russia, a group known as OPEC+. Additionally, International Energy Agency’s Fatih Birol said he sees a robust consumption recovery in the next six months.

This rebalancing, after the sharp pandemic-led slowdown in demand last year, will be led by resurgent demand in the United States, the world's biggest oil user, from vehicle consumption this summer, along with rising fuel needs in China, the world's second biggest oil consumer, and in Europe, and the U.K. in particular, as the region exits the lockdowns.

U.S. crude oil supply data from the American Petroleum Institute, released late Wednesday, showed a draw of 5.360 million barrels for last week, a substantial increase from the 439,000-barrel draw recorded during the previous week.

Investors now await crude oil supply data from the U.S. Energy Information Administration, due later in the day.

5. Celebrity e-car backer

The electric car market received celebrity backing Thursday, as it was announced that soccer star David Beckham has taken a 10% stake in Lunaz, a U.K.-based car restoration and electrification company.

The deal value was not disclosed, but Beckham will join Lunaz's founders and the Barclay, Reuben and Dellal families as a shareholder, the company said on Thursday.

The electric sector is making steady inroads in Europe, with European consumers buying more than half a million electric cars for the first time in 2020, despite the pandemic. That is expected to double to one million sales in 2021.

Germany is by far the biggest single market, with 64,700 sold in the first quarter of 2021, while the U.K. overtook France to become Europe’s second largest electric car market in the first quarter of the year.

Of course these numbers are still dwarfed by the sales of traditionally-fuelled cars, but the trend is clear and Norway last year became the first country in the world where more electric cars were sold than fossil fuel cars, thanks to generous subsidies.

AMC Rally, Jobless Claims and David Beckham - What's Moving Markets

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