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Top 5 Things to Know in the Market on Tuesday, June 2nd

EconomyJun 02, 2020 11:44
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By Geoffrey Smith -- Peaceful protests at the killing of an unarmed black man by police degenerate into riots and looting, while President Trump threatens governors with the imposition of martial law. China is going slow on its purchases of U.S. agricultural goods, while Germany is planning another big stimulus package - with its auto industry set to be one of the big beneficiaries. And oil prices are rising again as Russia and OPEC close in on an extension of their deal on output restraint. Here's what you need to know in financial markets on Tuesday, June 2nd.

1. U.S. cities hit by more violence

U.S. cities were rocked by another night of protests triggered by the killing of an unarmed black man by Minneapolis police.  Two separate autopsies conducted on George Floyd came to the conclusion of homicide, but offered different causes.  

The protests were marked on the one side by outbreaks of looting, and on the other by violence against both media and peaceful protestors as well as violent ones. President Donald Trump threatened in a call with state governors to send in combat troops if they failed to bring the situation in their states under control.

New York Governor Andrew Cuomo said New York would face another curfew tonight after widespread violence and looting in lower Manhattan overnight.  The protests threaten to derail the reopening of much of the U.S. economy, which analysts have repeatedly said depends heavily on consumer and business confidence rebounding.

2. China goes slow on farm goods purchases

Chinese government officials told major state-run agricultural companies to pause purchases of some U.S. farm goods including soybeans, Bloomberg reported, in a move that appears to undermine Beijing’s previous promises to increase purchases under the ‘Phase 1’ trade deal signed in January.

State-owned traders Cofco and Sinograin were ordered to suspend purchases while Chinese officials also told state-buyers to halt American cotton and corn imports, Bloomberg reported. It also noted that some pork purchases have been delayed.

The move is the latest development to reflect worsening relations between Beijing and Washington after the enactment of a new security law that the U.S. said ended the autonomy and freedoms of Hong Kong.

3. Stocks set to open higher, eye on reopenings

U.S. stock markets are poised to open higher, shrugging off the almost nationwide rioting and accompanying ballyhoo.

Markets are focusing more on the lifting of restrictions on the normal operation of businesses as efforts to mitigate the Covid-19 pandemic get a helping hand from the start of summer.

By 6:30 AM ET (1030 GMT), the Dow Jones 30 futures contract was up 178 points, or 0.7%, while the S&P 500 futures contract was up 0.6% and the Nasdaq 100 futures contract was up 0.6%.

One stock in focus later will be Apple (NASDAQ:AAPL), which has cut prices for its iPhones in China in an attempt to revive flagging sales in the wake of the pandemic.

4. Germany pulls Europe higher with new stimulus package

The German stock market hit a three-month high, pulling European markets in its wake, amid reports that the government will debate a further stimulus package to the economy Tuesday.

Local media reports put the size of the package at between 80 and 100 billion euros (($89 to $111 billion), and said much of it will be aimed at the auto industry, which supports over 12% of the country’s jobs directly and indirectly.

Elsewhere in Europe, the EU and U.K. begin their last round of talks on trading relations after the current post-Brexit transitional phase lapses at the end of the year. The U.K. government has said it won’t seek an extension of the transition, which has kept conditions for businesses effectively  unchanged since the U.K. formally left the bloc earlier this year.

5. API oil inventories due as Russia, OPEC mull extension of output deal

Oil prices surged again on hopes that OPEC and Russia will extend their agreement on output restraint, which is due to lapse at the end of June.

The Russian government is scheduled to discuss the issue at a meeting Tuesday, according to local media reports, with at least one suggesting that Russia’s preference is for an extension of only one month.

In the U.S., the American Petroleum Institute will report its weekly data on U.S. inventories of crude and refined products at 4:30 PM ET as usual.

By 6:30 AM, U.S. crude futures were up 2.6% at $36.40 a barrel, while Brent futures were up 2.9% at $39.42.

Top 5 Things to Know in the Market on Tuesday, June 2nd

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