Stocks advanced despite of the disappointing US employment report.
United States
US stocks set new closing and intraday highs and government bonds rallied strongly Friday after an unexpectedly weak May jobs report was seen to ease pressure on the Federal Reserve to increase the pace of interest rate increases beyond the three it has already signaled for this year. The Dow Jones industrials were up 0.3 percent, the S&P gained 0.4 percent and the Nasdaq jumped 0.9 percent. On the week, the three indices were up 0.3 percent, 1.2 percent and 2.5 percent respectively.
According to the latest release, May’s employment increased 138,000, lower than expectations for an 185,000 gain. At the same time, the unemployment rate slipped to 4.3 percent from 4.4 percent in April and the lowest since May 2001. A fall in the participation rate pulled down unemployment. Job gains are slowing as the labor market nears full employment. Stocks moved mostly higher Friday, as traders shrugged off weaker than expected jobs data. With the upward move on the day, the major averages climbed to new record closing highs.
Egalet, Lion Biotechnologies and Achillion Pharmaceuticals rallied. Broadcom advanced after the chipmaker’s quarterly results beat expectations. Lululemon Athletica jumped after the athletic apparel maker’s quarterly profit beat estimates. Energy shares including Devon Energy, Newfield Exploration, Range Resources and Transocean declined. Cooper rallied after a broker upgrade. Delta Air Lines advanced after the company reported its monthly operating performance. RH (formerly known as Restoration Hardware) tumbled after the retail chain cut its earnings outlook for the year.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$10.10 to US$1,274.95. Copper futures were down 0.5 percent to US$2.57. WTI spot crude was down 70 US cents to US$47.66. Dated Brent spot crude was down 68 US cents to US$49.95. The US dollar was down against the euro, pound, Swiss franc and the Canadian and Australian dollars. The currency was up against the yen. The Dollar Index was down 0.6 percent. The yield on the US Treasury 30 year bond was down 6 basis points to 2.81 percent and the 10 year note was down 5 basis points to 2.16 percent.
Europe
European stock indices advanced Friday even though they pared their gains following the release of the weaker than expected US employment report. The FTSE edged up 0.1 percent, the CAC gained 0.5 percent, the DAX advanced 1.2 percent and the SMI was 0.2 percent higher. For the week, the FTSE and SMI were unchanged while the CAC edged up 0.1 percent and the DAX jumped 1.8 percent. The DAX was supported by automakers after better than expected US auto sales data.
Linde rose after its board voted to approve a merger with US peer Praxair. Ipsen advanced after announcing a share buyback. BHP Billiton was unchanged after it lifted a declaration of force majeure at its Escondida copper mine in Chile. Orexo AB gained in Stockholm. The pharmaceutical company announced that its OX-CLI project has advanced into clinical phase I, triggering a milestone payment of $2.5 million from AstraZeneca. Banco Popular Español sank in Madrid after Thursday’s selloff on solvency concerns. Shares of BP and Royal Dutch Shell declined as did Tullow Oil. Both Volkswagen and BMW were higher.
Eurozone April producer price inflation climbed 4.3 percent on the year, up from the 3.9 percent increase in March. The Greek economy expanded in the first quarter, in contrast to the contraction estimated previously. First quarter gross domestic product grew 0.4 percent on the quarter rather than the original 0.1 percent contraction estimated on May 15. The UK construction sector expanded at the fastest pace in 17 months in May as low interest rate and strong labor markets underpinned residential building activity.
Asia Pacific
Shares advanced Friday after upbeat US and European economic data helped investors shrug off US President Donald Trump’s decision to withdraw from the Paris climate agreement. Investor focus remained on the US employment report which would be released after markets here were closed for the week.
The Shanghai Composite edged up 0.1 percent Friday but was 0.1 percent lower for the holiday shortened week. Investors worried about tighter liquidity and slowing economic growth. The Hang Seng was 0.4 higher on the day and jumped 4.2 percent on the week.
Both the Nikkei and Topix added 1.6 percent as strong private US hiring data helped lift the dollar to a one-week high against the yen. On the month, the Nikkei was up 2.5 percent and the Topix was up 2.7 percent. Exporters Honda Motor, Sony and Toshiba climbed. Among financials, Mitsubishi UFJ Financial, Sumitomo Mitsui Financial and Nomura Holdings jumped.
The S&P/ASX was up 0.9 percent and the All Ordinaries was 0.8 percent higher. The indices gained 0.6 percent and 0.5 percent respectively for the week. BHP Billiton advanced on news it has lifted a declaration of force majeure at its Escondida copper mine in Chile. Rivals Rio Tinto and Fortescue Metals Group were higher.
The Kospi was up 1.2 percent and 0.7 percent on the week. Shares rallied after revised Bank of Korea data showed first quarter GDP grew faster than initially estimated. The economy expanded a seasonally adjusted 1.1 percent on the quarter.
The Sensex was up 0.6 percent and 0.8 percent on the week. The index hit fresh record highs on Friday, with a surging rupee, hopes of good southwest monsoon rains, robust monthly sales figures from automakers and firm global cues helping underpin investor sentiment. However, overall gains were capped somewhat due to caution ahead of the Reserve Bank of India’s monetary policy announcement on Wednesday.
Looking forward

Central Bank activities

June 6

Australia

Reserve Bank of Australia Monetary Policy Announcement

June 7

India

Reserve Bank of India Monetary Policy Announcement

June 8

Eurozone

European Central Bank Monetary Policy Announcement

The following indicators will be released this week…

Europe

June 6

Eurozone

Composite & Services PMI (May)

Germany

Composite & Services PMI (May)

France

Composite & Services PMI (May)

June 7

Eurozone

Gross Domestic Product (Q1.2017 final)

Germany

Manufacturing Orders (April)

June 8

Germany

Industrial Production (April)

France

Merchandise Trade Balance (April)

June 9

Germany

Merchandise Trade Balance (April)

UK

Merchandise Trade Balance (April)

Industrial Production (April)

France

Industrial Production (April)

Asia Pacific

June 7

Australia

Gross Domestic Product (Q1.2017)

June 8

Japan

Gross Domestic Product (Q1.2017 revised)

Australia

Merchandise Trade Balance (April)

China

Merchandise Trade Balance (May)

June 9

China

Consumer Price Index (May)

Producer Price Index (May)

Americas

June 5

United States

Factory Orders (April)

ISM Nonmanufacturing Index (May)

June 6

United States

JOLTS (April)

June 8

Canada

Housing Starts (May)

United States

Initial Unemployment Claims (week ending prior Saturday)

June 9

Canada

Labour Force Survey (May)

Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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