Latest on the US jobs report, US WTI oil futures and indices across the Globe 

Summary

• On 2 July, the US stocks surged as unemployment fell, with the economy gaining 4.8 million jobs in June, but rising COVID-19 cases in the US has halted the recovery process.
• The rise in stocks recorded on 2 July came in due to positive jobs report giving reassurance of continuing economic recovery.
• Job gains were noted in the leisure, hospitality, retail, healthcare, and manufacturing sectors in June.
• Oil markets slid on 3 July due to resurgence of virus cases in the largest consumer market- the US, which has led to a rise in gas stockpiles, threatening crude demand.
• Fears persist that OPEC and its allies, including Russia might abandon the phased renewal of supply to the market and restart price war.

The US stocks rallied on 2 July post June employment report reflected that employers in the US added a record 4.8 million jobs in May, much more than anticipated, reassuring investors that economy was on the path of recovery from coronavirus induced recession. The unemployment rate fell from 13.3% to 11.1% in May. Further, May was the second consecutive month of adding jobs since massive layoffs swamped the country.

On 2 July, all the major US stocks gained with the benchmark S&P 500 Index posting gains for the fourth consecutive day. On the same day, Dow Jones Industrial Average Index rallied 0.36% to 25,827 points, while S&P 500 Index rose 0.45% to 3,130 points, and NASDAQ Composite Index closed flat at 10,207.63 points.

On 2 July, STOXX Europe 600 Index closed 0.78% lower at 365.43 as virus concerns in the US softened the confidence coming out from optimistic economic figures of the US, China, and euro zone. However, on 6 July, at the time of writing, the index was trading at 371.64 points, up by 1.64%.

The US stocks ended the market session higher on 2July due to positive job reports data, which strengthened the idea that the US economy could recover early as more businesses reopen.

However, with record payroll gains in May and June consecutively, the labour market recovered only a fraction of the 22 million jobs lost during March-April decline. The US is now in the 6th month of recession, and its recovery can stop as new coronavirus cases are surging and several states are hit by a resurgence of the virus due to which they have decided to reverse the plans to reopen their economies.

The US jobs report

Companies have appointed many people in the past 2 months; the unemployment rate is yet more than 11% than during the global financial crisis.

Hiring in June was supported by businesses reopening and government’s aid. States across the US reopened restaurants, gyms, and salons that were shut for several weeks to contain the virus spread.

There were job gains in the leisure and hospitality sector which accounted for 40% of June’s employment growth. Restaurants and bars were major drivers, but the workforce within these sectors are mostly susceptible to repeated sackings due to of late surge in COVID-19 infected cases in a number of states of the US. While Texas ordered bars to close, Florida imposed new restrictions on bars. New York City delayed the reopening of indoor dining at restaurants. California halted indoor restaurant dining and closed movie theatres for most of the residents.

Further, employers in retail, healthcare and manufacturing also added jobs in June. Companies have also recalled workers who were temporarily laid off during coronavirus which supported in bringing unemployment number down in June by about 5 million as compared to May.

Donald Trump appreciated the employment data stating that the US economy is roaring back. Many Americans are still hesitant to shop or eat at restaurants due to rising COVID-19 cases. The speed at which businesses hire and consumers spend depends on the course of the virus.

US WTI Oil Futures

Oil prices traded steadily on 3 July; while jobs addition and a recovering economy are good for oil and gas companies, the demand for oil and refined products has been down by double-digit levels, pushing oil prices down more than 40% from the start of 2020.

Crude Oil benchmark WTI 1-month futures traded at $40.87 a barrel, gaining 0.54% against previous close, while Brent 1-month futures increased 1.42% to $43.42 a barrel at 6:22 AEST on 6 July 2020. Also, oil markets slid on 3 July due to rising coronavirus cases in the US which put crude oil demand at risk.

The US reported about 50,000 new virus cases on 2 July resulting in many states to delay plans to reopen stores and resume businesses. Another worry for the US is OPEC and its allies including Russia that may again begin their price war and halt the phased restoration of supply to the market in July end.

As per media reports, Saudi Arabia has warned that it will resume the price war that led to intensive fall in the oil prices unless associate OPEC members follow production cuts agreed by the cartel. OPEC compliance is necessary to maintain market balance and eventually pulldown global inventories.

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Southern US states are amongst the US’ most weighty consumers of gasoline that have been wrecked by the virus. The latest state government health recommendations pleaded Sun Belt citizens to inhibit movement combined with re-levying of localised lockdowns; uncertainty loomed over the oil market while the nation was heading into one of the busiest driving weekends, as had been a custom since many years.

The probability of downside scenarios weighing on oil about a month ago have reduced substantially; it is yet to be seen if the market sails through it.