The second day of June was packed with potential market moving news, the latest OPEC meeting, the monthly rate setting meeting from the ECB, US employment data to mention the main ones. At the end of the day the global developed markets as well as the oil price remained largely unchanged.
The ECB left rates unchanged, as expected, however they did upgrade growth forecasts for this and the following couple of years. At the post rate announcement press meeting the ECB provided details of its corporate bond buying programme, due to commence in June. The ECB clarified it will be prepared to buy a broad range of corporate debt, but not bank bonds. They indicated that they are happy to buy debt in small and medium sized enterprises, they had no problem buying debt offering negative yields, and they would not be forced to sell holdings should the paper be downgraded from investment grade.
The latest OPEC meeting appeared to offer a more united front in announcing that OPEC had decided not to change its output policy. The oil price was little changed on the news as this news was partly offset by the Energy Information Administration announcing another weekly draw in US oil stocks. The oil price has rallied 80% from its lows earlier on in the year, driven as much by supply disruptions as much as demand increases. Technical analysis suggests the oil price is overbought, a term used to describe when an asset price gaps too far away from the moving averages, and the price should correct.
Later today will be the main event for US stocks and bonds as we get the latest employment data ahead of the next Federal Reserve meeting in a couple of weeks’ time. On Thursday we received ADP employment change for May, announcing that 173,000 new jobs had been created in the month, pretty much in line with forecasts. However, it is the lowest number of jobs created in any month this year.
The unemployment rate is forecasts to stay at 4.9% for May, as well as this we get the latest average earnings data, participation rate and non-farm pay rolls. Non-farm pay rolls is considered to be those employed in rolls that are responsible for the US GDP. Aside from this there is a raft of manufacturing and service lead indicators in the form of Purchasing Managers surveys for May, as well as month on month US factory orders for April.
All this data will go some way to analysts trying to come to terms with what the Federal Reserve will do with interest rates in the coming months. We also get speeches from several Federal Reserve members during the day, one imagines they will want to remain fairly non-committal.