Global Stock Markets Move Higher Despite US Unemployment Figure Error

Friday’s job report from the Bureau of Labor Statistics was the subject of significant controversy over the weekend. The report put the US unemployment rate at 13.3% in May, well below the level expected, but the unit admitted that a classification error had led to some furloughed workers not being counted as unemployed. If those individuals had been counted, the unemployment rate would have come in three percentage points higher. Despite the error, stocks were buoyed at the start of the week, as economists had been anticipating the unemployment rate to come in at close to 20%. Overnight in Asia both the Nikkei and the Hong Kong Hang Seng are up, with Japan’s index closing up 1.4% higher, and Hong Kong’s making marginal gains. US stock futures also traded higher ahead of Monday’s open, with the updated unemployment rate still well below what was expected. Investors are now looking forward to the Federal Reserve’s updated policy statement on Wednesday, which will be accompanied by its first economic projections of 2020. The surprising unemployment rate figures may impact the Fed’s interest rate stance and speed up the timeline for rates to move up from zero.

Elsewhere, the oil market was given a lift after OPEC and Russia agreed to extend their record oil production cuts for a further month. Crude has already recovered to over $40 a barrel, with the group attempting to prop up a market devastated by the coronavirus pandemic.

S&P 500 close to breakeven year-to-date

All three major US stock indices made major gains last week, with the Dow Jones Industrial Average leading the way at 6.8%, versus 4.9% for the S&P 500 and 3.4% for the Nasdaq Composite. Investors looked past widespread civil unrest, instead choosing to focus on hopes of economic recovery. The Dow was boosted by a rebound in more economically sensitive value stocks, that have largely underperformed in 2020 so far. The Nadsaq Composite is now up near 10% in 2020 so far, while the S&P 500 is close to breaking even year-to-date. Energy and financial names had a particularly good week, with the former driven by US oil prices rebounding, while financial stocks were boosted by a rebound in US treasury yields - which hit an 11-week high. The Dow was helped higher by a major rebound in Boeing’s share price, driven by investor optimism around what the easing of lockdowns means for the airline industry. Boeing (BA) stock gained 36% last week and is now up almost 60% in 2020 so far. Airlines Delta (DAL), United (UAL) and American (AAL) all posted significant gains last week too, finishing up 31%, 44% and 67% higher respectively.

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