The FTSE 100 hit a three-month high and continental benchmarks also rallied on the back of the well-received US non-farm payrolls report. 

Last month 2.5 million jobs were added in the US, which was in stark contrast to the 8 million jobs that economists were expecting. The April reading of -20.5 million was revised to -20.68 million, so at least in May some of the previous job losses were recouped. The unemployment rate fell from 14.7% to 13.3%, and the annual average earnings cooled from 8% to 6.7%. The slide in the jobless rate adds weight to the view the US labour market is turning around. The fall in the earnings figure could suggest that previously furloughed staff are now going back to work as lower income jobs such as retail assistants are included in the report. The upward move in stocks is fuelled by hopes that economic activity will rise as lockdown restrictions continue to be loosened.

Taylor Wimpey confirmed that construction work is underway at the majority of their sites in England and Wales. The house builder said there has been a notable increase in client interest, particularly in recent weeks. All the furloughed staff have returned to work, which is encouraging as it is a clear sign that things are going back to normal for the group. At the end of May, the order book was £2.77 billion, which was a 10% increase on the year.

Premier Oil are to acquire North Sea assets from BP at a lower price. The small oil company will fund the purchase by issuing discounted shares to ARCM – a hedge fund that is it’s largest creditor. The original proposal was that Premier would pay $625 million to BP, but that has now fallen to $210 million. The abandonment obligations have been revised to $240 million from $600 million. Premier are snapping up the assets at a lower price, but contingency payments to BP will be required if the price of oil hits $55 per barrel.

The optimism in relation to economies reopening has boosted beleaguered tourist trade. Carnival, the cruise operator, and airlines such as Air France, easyJet. Lufthansa and Wizz Air are higher today. BA’s parent, IAG, is considering taking legal action against the UK government’s decision to make new arrivals in the UK self-isolate for 14 days. Such a move would greatly hamper the aviation industry, but on the other-hand, Westminster are more interested in suppressing the virus than the profitability of the travel sector.       

Biffa shares are in the red as the company is enduring a ‘modest’ cash burn on account of the current environment, and the group said it might look into raising additional capital. The move lower in the stock price hasn’t been too large as the company is in an reasonably secure position in terms of liquidity, so it won’t be seeking new funds as an emergency measure The Covid-19 crisis has had a ‘very significant’ impact on the business, and the short-term outlook remains uncertain. In an effort to save cash, no final dividend was proposed. The full year revenue increased to £1.163 billion from £1.09 billion, and the statutory profit before tax jumped from £21.5 million to £56.4 million.   

US

Stocks are driving higher on account of the US jobs update. In recent months, US states have been slowly unwinding their lockdown rules and businesses have been reopening. Today’s employment report paints a picture of a labour market that is bouncing back, hence the positive run on Wall Street.

Slack Technologies shares are down 15% today following the first quarter results that were posted last night. Revenue jumped by 50% to over $201 million, topping the $188.1 million forecast. In the previous quarter, the group saw revenue growth of 49%, so there are some concerns the growth rate isn’t powering ahead in the current environment. The messaging service has seen a surge in popularity so it seems that some traders thought there would be a bigger rise in the sales growth rate. The first quarter loss per share was 2 cents, while the consensus estimate was for a loss of 6 cents. The group’s outlook for the second quarter was ahead of forecasts too as the loss per share is tipped to be 3-4 cents and the revenue is predicted to be between $206 million and $209 million.

Airlines are flying high as they are planning on increasing their flight schedules in the months ahead. Last night United Continental announced plans to resume roughly 140 non-stop routes. The update echoed the news from American Airlines who greatly increased their domestic schedule for July to 55%. There is a growing feeling the aviation sector is emerging from the doldrums. South West Air and Delta Air are higher too.  

FX

The US dollar index lost ground in the last eight sessions, and it was even in the red earlier this morning, but the better-than-expected US jobs report has pushed it into positive territory. The greenback has been underperforming recently, but now there are signs the US jobs market might have bottomed out, so we might see the US dollar enjoy a rebound.  

USD/CAD traded at a three month low as the jobs report from Canada was also better-than-expected. The employment change showed that nearly 290,000 jobs were added last month, while the consensus estimate was for 500,000 jobs to have been lost. The unemployment rate ticked up to 13.7% from 13%, but traders were anticipating a reading of 15%.

The CMC GBP index is higher today even though the EU’s chief negotiator, Michel Barnier, said that not much progress has been made in relation to working out a deal for the UK’s post transition period relationship with the EU. The sterling shorts are being squeezed.  

Commodities

Gold has fallen to its lowest level in over a month as traders are willing to take on more risk and buy assets like stocks. The US labour report impacted the metal on two fronts, it signalled the US economy is recovering, which in turn helped the US dollar. The commodity benefited for the fear surrounding the pandemic, but as those fears fade, we might see the asset slide.

WTI and Brent crude have rallied ahead of the OPEC+ meeting that will take place tomorrow. There is chatter the current production level will be extended beyond this month, when it was originally due to taper-off, but there is talk that it will be maintained. The big unknown is how long will the existing output level be extended for? The US non-farm payrolls report helped oil too as it implies the US economy is recovering, so demand should rise too.  

 


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