Market Overview

3 July 2020

U.S. Jobs, Chinese and European PMI Favours the Market Rally

A very strong U.S. jobs report on Thursday created necessary conditions for global markets to continue the rally on faster recovery expectations. Whether these conditions are sufficient, will probably be shown next week, since today the American stock exchanges are closed for the Independence Day celebrations in the United States. However, even in the context of limited trading activity, the signs of growth were additionally appended on Friday by both Chinese and European indicators of a favourable business environment.

The Chinese service sector made another move toward improvement with the Caixin Purchasing Managers Index (PMI) released at 58.4 points in June. This is the highest reading that has been observed since 2012. It is not surprising that China is recovering faster than any other country, because in China the start of the pandemic became known in earlier stages, and they had enough time and determination to bring it under control. However, the pace of activity in the previously quarantined service sector is impressive, and this is good news for all global economic players.

Better than expected data also came from France, where the Services PMI was 50.7 in June after 31.1 in May, with the Markit Composite PMI reading at 51.7 points. In Germany, both Service and Composite PMI readings were above 47 points against 45.8 points in average estimated by Bloomberg expert polls after just 32.3 points of Composite PMI a month before. The Italian Services PMI was at 46.4, which is just a little bit below the average expectations near the 47.0 level. The Spanish Services PMI came in at 50.2 points. So, finally, the PMI services indices for the European Union business community showed that the region is picking up fast, although not quite ending its decline, climbing to 48.3 in June from 30.5 in May. Because, typically, a PMI number below 50 indicates that activity is still contracting. Statisticians in the United Kingdom also calculated the Service PMI at 47.1 on Friday against 29.0 for May, although the U.K. may have to fight the remnants of the COVID-19 infection probably for a longer time than continental Europe.

As for the American employment data, they are just as much perfect as possible at present after-quarantine conditions. The U.S. economy happily added 4.8 million jobs in June, while the numbers for May were also revised up by nearly 200,000 jobs to 2.7 million. It is worth recalling that May's previous 2.5 million jobs was a very big surprise, when the figure was released in the beginning of June. And it raised a lot of questions, but even officials from the team of the former U.S. President Barack Obama said in public that political manipulation of this figure is impossible, based on their own experience.

The general U3 unemployment rate came in at 11.1%, below both the 12.4% reading that was widely expected and below last month’s figure of 13.3%. The overall U6 unemployment rate also declined to 18% from 21.2% in May, which includes the so-called marginally attached to the labour force people, plus total employed part time workers for economic reasons. Taken together, the data is so good that it will unlikely  be spoiled by the average hourly earnings, which fell by a worse-than-anticipated -1.2% m/m, likely on the back of previously laid off workers in low-paid professions who returned to work. June's results may not be disturbed even by the clear fact that the U.S. economy still has around 15 million fewer jobs than it had in February.

A fly in the ointment may be suggested with the understanding that the non-farm payrolls survey was conducted in early-to mid-June, when almost every U.S. state had lifted restriction orders, but before the danger of the virus started to resurge over the last weeks. So, the worry could be renewed as data was released now for the period when there was a very good "window" of opportunities, as the labour market may not recover  as fast because a new record daily number of 55,000 infection cases was just detected by official tests yesterday. However, these warning thoughts may be ignored by markets, at least for a while, as the stock indexes in America and Europe reacted to the report in an extremely positively way. The high-tech Nasdaq index broke another historical record, as the broad-market S&P500 index rose for two hours and reached mid-June levels. Pan-European indexes climbed even higher before moderate profit-taking led to a pullback. However, this was the move just a little below, and it can be perceived as a very natural process before a long weekend. To conclude, it seems that a good base is created by both the news and on the market charts for a new jump to the higher levels soon.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.


Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
23 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.42% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2021 Teletrade-DJ International Consulting Ltd

Teletrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. Telerade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies.

Telerade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75.42% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.