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Serving as a pre-empt for today’s key Non-Farm Payrolls (NFP) data, May’s ADP employment change report had strongly boosted the market’s confidence with a strong number and lifted risk sentiment. With an increase of 253k, the number had significantly exceeded the market’s 180k consensus and jostled US markets higher on Thursday. All eleven sectors on the S&P 500 index were lifted by the positive sentiment following the release, led by the financial, healthcare and materials sectors. Correspondingly, the market withdrew from US treasuries and gold alike.

  • While having been a good directional indicator, the ADP report’s headline figure had exceeded the NFP report by approximately 18% in the past 12-month period and 50% in the past 6-month period. This highlights the over exuberance that the data may set the market ahead of the Bureau of Labor Statistics’ release.
  • The major US equity indices ended the day up by circa 0.8%, reaching all-time highs. The positive sentiment has been carried over to Asia, where the Nikkei was up 1.7% at the time of writing. Nikkei has topped 20,000 for the first time since 2015. Despite the strong risk appetite, the impact on the US Treasury market was very limited, with the benchmark yield only marginally higher. This may reflect the market now being more or less fully priced for a June Fed hike.
  • Oil prices also struggled to make much of a headway and though the prices did make an attempt to break through the $49.5 region, the oil inventory data showed a strong inventory once again which caused the oil prices to crash through the $49 level. We also have the Russian ministers say that they would be fine with weak oil prices, if that’s what the market wants, and all this was enough fuel for the sellers to keep selling oil contracts and put the oil prices under a lot of pressure. The prices may continue to be weak in the short term.
  • Gold markets saw some choppy trading yesterday as the investors are still undecided on where to invest. The global risks and uncertainties would mean that it would be ideal for the investors to put their funds in safe havens like gold and silver but the possibility of a rate hike in the US would make the dollar pretty attractive for those who seek some solid returns. It is this confusion that seems to be bugging the traders and investors alike and that is why we have been seeing the gold prices consolidating and trading within a tight range between 1260 and 1270 over the last few days

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