Disappointing US ADP private payroll numbers registered its lowest reading seen since Mar 2010, adding only 27k jobs versus a 180k forecast. It suggests that the private sector, including manufacturing, construction and mining companies are reluctant to hire amid rising trade tensions.

Small businesses lost 52k jobs last month. May’s reading marks a sharp decline from the previous month, which saw 271k private jobs added.

The US economy is likely to moderate in the months to come, as global cyclical slowdown deepens on the rise of trade tariffs and manufacturing activities around the globe deteriorate further. Analysts forecast the US economy could grow at a slower pace of 1.5% in the April – June quarter.

The lacklustre ADP jobs report led markets to put a lower expectation on this Friday’s non-farm payroll report, with 185k increase in jobs expected.

The equity market, however, chose to ignore a deteriorating fundamental picture and hope that the Fed will soon cut rates to save the world. According to the CME Fed watch, the likelihood of a Fed rate cut by the end of this year has surged to over 98%. The future’s market is now pricing in the probability of one, two, and three rate cuts at 11%, 31% and 36% respectively. The US dollar Index has reached a peak at 98.0 area and since entered into retracement. This helped to alleviate pressure on US equities and EM assets over the last couple of days.

The S&P 500 index rallied for a second day back to above 2,820 points. Real Estates (+2.33%), utilities (+2.14%), IT (+1.38%) and Consumer Staples (+1.12%) were among the top gainers whereas energy (-1.08%) was lagging as oil prices edged lower.

Given the background of elevated trade uncertainties and sour fundamental elements, the sustainability of this stock market rally is questionable. Technically, the S&P 500 index is still in a bearish trend as its SuperTrend (10,3) remains in a bearish setup. Immediate support level can be found at 2,800 and then 2,711 points.

The oil market continued its bearish trajectory last night, hammered by a much higher than expected US DoE crude inventory reading. It shows that US commercial crude inventory surged by 6.77 million barrels over the past week, compared to a forecast of a 1.5 million barrels drop. Inventory has climbed up by significant amount over three out of the last four weeks, suggesting that supply overshot demand, and that inhibited oil prices.

Brent oil is still in a deep correction phase, as its SuperTrend (10,2) and 10-Day SMA are both sloped downwards. Momentum indicators RSI and DMI, however, has shown signs of temporary oversold and a technical rebound is possible in the near term.

US Private Payrolls Forecast

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