Opening Call: The Australian share market is to open higher.
U.S. stocks fell as the May payrolls data showed strong but slower job growth. The yield on the 10-year Treasury ticked up to 2.94%. The WSJ Dollar Index climbed to 94.91, pushing gold prices slightly lower. Oil rose as an OPEC+ announcement of an output boost didn’t change the outlook much.
Australia’s S&P/ASX 200 cimbed 0.9%, rounding out a volatile week with gains in commodity and tech stocks. The ASX 200 gained 0.8% across the week after alternating between daily wins and losses. It has nonetheless rebounded from four weekly losses with three consecutive weekly gains. The financial, telecommunications and consumer discretionary sectors all closed flat.
U.S. stocks dropped and suffered losses for the week after the latest employment report showed the U.S. labor market added jobs at a strong but slower clip in May. The S&P 500 lost 1.6%, while the Dow Jones Industrial Average fell 1% and the Nasdaq Composite declined 2.5%. All three indexes declined more than 0.9% for the week. Federal Reserve officials are closely monitoring the state of the labor market as they decide how much and how quickly to raise interest rates in the coming months.
One point of concern for officials is that a strong labor market will add to elevated inflation as competition for workers boosts wage-bargaining power. Fed Vice Chairwoman Lael Brainard said Thursday that she supported plans to raise interest rates by a half-percentage point at a meeting later this month and again in July.
The monthly jobs report used to be the biggest factor for Fed rate-changing decisions, but months of strong employment gains has lessened its importance. Now all eyes are on inflation data, traders and fund managers say. Next Friday, the Labor Department will report data on U.S. inflation in May.
Michael Antonelli, managing director and market strategist at Baird, said he saw one bright spot this week for stocks. After Microsoft cut its sales and revenue guidance on Thursday, the company’s shares still closed the day higher. “That was telling,” said Mr. Antonelli. “It meant maybe the most dire predictions have been priced in.” “This summer could just be a grind,” he said.
Gold futures edged lower as the dollar gained versus major rivals after a stronger-than-expected rise in U.S. nonfarm payrolls reinforced expectations for higher interest rates from the Federal Reserve in coming months. Gold futures for August delivery were down 0.9% at $1,854.80 an ounce. “Traders were expecting to see a stronger deceleration with job growth that could possibly make the Fed pivot away from a half-point rate hike in September,” said Edward Moya, senior market analyst at Oanda, in a client note. While both June and July are expected to see half-point interest rate hikes, the “economy is not softening quickly,” Moya said.
Gasoline futures extended a run into record territory, while oil futures logged strong weekly gains a day after traders shook off a decision by OPEC+ to raise output by larger increments in July and August. West Texas Intermediate crude for July delivery finished up 1.7% at $118.87 a barrel on the New York Mercantile Exchange, rising 3.3% for the week. August Brent crude, the global benchmark, gained 1.8% to settle at $119.72 a barrel on ICE Futures Europe, leaving it with a 3.6% weekly advance. Back on Nymex, July gasoline futures rose 1.5% to end at a record $4.2522 a gallon, contributing to an 8.7% weekly gain.
The Organization of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed Thursday to raise output by 638,000 barrels a day in July and August, exceeding the 432,000 barrel-a-day increments previously penciled in by the group. While the move could help fill the gap left by Russian crude exports targeted by embargoes and sanctions in response to the country’s invasion of Ukraine, it isn’t seen as enough to fully offset the expected lost barrels, analysts noted. Moreover, they noted that OPEC+ has already fallen short on previous, smaller production boosts.
Oil wasn’t pressured in the aftermath of the move “because OPEC+ merely packed the production hikes intended for the coming three months into the next two. In other words, more oil will be available to the market only in the short term, if at all,” said Carsten Fritsch, commodity analyst at Commerzbank, in a note.
Major currencies fell against a stronger US dollar in European and US trade. The Euro fell from highs near US$1.0760 to lows near US$1.0705 and was near US$1.0720 at the US close. The Aussie
dollar eased from US72.65 cents to lows near US72.00 cents and was near US72.05 cents at the US close. And the Japanese yen eased from levels near 129.80 yen per US dollar to JPY131.00 and
was near JPY130.85 at the US close.
European sharemarkets fell on Friday. Autos led declines, down 1.6%, with technology down 1.2%. Shares in French auto parts supplier Faurecia slid 6.8% after it launched a 705 million euro (US$758 million) capital raising to fund its acquisition of German rival Hella. The pan-European STOXX 600 index fell by 0.3% and lost 0.9% on the week. The German Dax index fell by 0.2%. The UK market was closed for a public holiday.
Earlier Friday, Japanese stocks ended higher, led by gains in retail and tech stocks, as hopes grew for a recovery in retailers’ earnings and concerns eased about borrowing costs. Fast Retailing gained 5.9% after Uniqlo sales in Japan increased 17.5% on the year in May. The Nikkei Stock Average rose 1.3%.