04.06.2021 -
Global equities remained steady for the week, balanced by mixed US job numbers. The yield on the benchmark US 10-year Treasury note held at 1.56% and the price of a barrel of West Texas Intermediate crude oil jumped to a two-year high of $69.25 on a planned production increase. Volatility, as measured by the Cboe Volatility Index (VIX), was little changed at 16.6.
MACRO NEWS
Rising global growth forecast
The global economy is set to grow 5.8% this year and 4.4% next year, the Organization for Economic Cooperation and Development said, raising its estimates from 5.6% and 4.0%, respectively. The global economy has now returned to prepandemic activity levels but has not yet achieved the growth expected prior to the global health crisis. While vaccination campaigns have allowed advanced economies to gradually reopen, many emerging market economies are being held back by slow vaccination deployments and new COVID-19 outbreaks.
Agreement on oil production increase
A group of some of the world’s most powerful oil producers agreed on Tuesday to continue gradually easing production cuts amid a rebound in oil prices. OPEC and its oil-producing allies, known as OPEC+, will boost output in July, in accordance with the group’s April decision to return 2.1 million barrels a day to the market between May and July. OPEC Secretary General Mohammad Barkindo said that he did not believe higher Iranian supply would be a cause for concern. Production policy beyond July was not decided on. The group will meet again on 1 July.
US eviction ban expires this month
More than 11 million Americans are behind on their rent and many could be forced from their homes when the national eviction ban expires in June. The Centers for Disease Control and Prevention’s eviction moratorium, which has been in effect since September, will be lifted on 30 June. Experts say the number of evictions could skyrocket when the ban lifts. Around 15% of adult renters are behind on their housing payments, according to an analysis by The Center on Budget and Policy Priorities, and eviction rates will likely be higher in some states than others. For example, nearly 25% of renters are behind on their housing payments in Florida and South Carolina, compared with only 6% in Maine and Kentucky. Across the country, Black renters are nearly four times as likely to be behind on their rent as white renters. Older Americans are yet another vulnerable group: More than 100,000 people over the age of 65 said they expected to be evicted within the next two months and almost 450,000 renters between the ages of 55 and 64 are in a similar predicament.
EU primed for additional stimulus push
Following a decision last July to raise €750 billion ($917 billion), the European Union is set to raise much-needed funds from public markets and boost the economies of its 27 members. Now that the legislative steps have been taken, the European Commission can tap capital markets in search of those funds as early as this month. The stimulus comes on top of what the individual governments have already deployed in the wake of the pandemic. EU capitals will receive an initial disbursement of 13% of the total amount they are to receive in the coming months, with future payments hinging on whether countries have implemented necessary reforms.
US supplemental unemployment benefits to end
Nearly four million Americans will be affected by the early withdrawal from federal unemployment programs. In the past month, 25 states have announced plans to end pandemic-era benefits slated to expire 6 September, with some states ending the aid as early as 12 June. The states include Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana, Iowa, Maryland, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West Virginia and Wyoming. Those affected will lose the $300 weekly unemployment supplement, and most states are ending benefits entirely for the self-employed, gig workers and the long-term unemployed.
China alters policy on children
China announced that couples would be permitted to have up to three children, a major policy shift from the existing limit of two children. In May, China’s once-in-a-decade census showed that the population grew at its slowest rate during the last decade since the 1950s, with a fertility rate of 1.3 children per woman for 2020 alone, on par with ageing societies like Japan and Italy. In 2016, China scrapped its decades-old one-child limit to a limit of two children, but this failed to result in a sustained surge in births as the high cost of raising children in Chinese cities deterred many couples from starting families.
QUICK HITS
Initial jobless claims in the United States fell below 400,000 for the first time since the early days of the pandemic, the US Department of Labor reported Thursday. However, on Friday morning, job creation in May increased 559,000 but was below the 671,000 expected. April job growth was upwardly revised to 278,000 but was still well short of the initial 1 million job estimate. The unemployment rate fell to 5.8% from 6.1%.
In May, the Dow Jones Industrial Average gained 1.93% and the S&P 500 Index was up 0.55%, but the NASDAQ declined 1.53%, breaking a six-month winning streak.
The Australian and North American units of the world’s largest meat processors were hit by a cyberattack on their information systems last weekend, causing its Australian operations to shut down on Monday. The White House said that the attack likely originated from a Russia-linked cyberterrorist group, with the vast majority of the meatpacker's plants were generally back on line Wednesday.
The US Supreme Court is expected to release a decision in the coming days that could provide the first glimpses of how its 6-3 conservative majority might shape the future of LGBT rights.
Canada’s economy grew 5.6% on an annualized basis in the first quarter, missing analysts’ expectations. However, the Canadian economy is expected to have contracted in April for the first time in a year as a result of strict public health measures, Statistics Canada data revealed.
The world’s 10 largest chip manufacturers saw their revenues surge to a record high in the first quarter of 2021, according to market research firm TrendForce.
Eurozone manufacturing activity expanded at a record pace in May, which suggests growth would have been even faster without supply bottlenecks that have led to an unprecedented rise in input costs.
More than 50% of the US population has received one COVID-19 vaccine shot or more, federal data show, as nationwide case counts continue to fall. Seventy percent of residents in 12 states have received at least one vaccine shot. The states are California, Connecticut, Hawaii, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New Mexico, Pennsylvania, Rhode Island and Vermont.
US President Joe Biden wants to raise the top income-tax rate for wealthy households to 39.6% from the current 37% to help finance his legislative agenda. That rate would apply to single individuals with taxable income over $452,700 and married couples filing a joint tax return who make over $509,300.
President Biden offered to drop plans to raise corporate tax rates as high as 28% and proposed instead a minimum 15% tax rate aimed at ensuring all companies pay taxes. In return, Republicans would have to agree to at least $1 trillion in new infrastructure spending.
Member nations of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership agreed to allow the United Kingdom to start the process of joining the pact. The CPTPP removes 95% of tariffs between its members: Japan, Canada, Australia, Vietnam, New Zealand, Singapore, Mexico, Peru, Brunei, Chile and Malaysia. Separately, Norway, Iceland and Liechtenstein have reached agreements with the UK on their post-Brexit trade relations.
A significantly high number of cryptocurrency firms are failing to meet UK requirements on preventing money laundering, the country’s financial services watchdog warned.
US private job growth for May accelerated at its fastest pace in nearly a year as companies hired nearly a million workers, according to a report Thursday from payroll processing firm ADP. Total hires came to 978,000 for the month, a big jump from April’s 654,000 hires.
Britain's services sector recorded the biggest jump in activity in 24 years in May as pubs and restaurants resumed serving customers indoors following months of lockdown.
The pace of interest rate hikes implemented by emerging market central banks slowed in May as developing nations faced uneven economic recoveries from the COVID-19 pandemic. Policymakers across a group of 37 central banks in developing economies delivered a net one interest rate rise in May after a net four hike in April.
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