Oil surges on OPEC+ cut

US equities closed out the holiday-shortened week on a strong note, with the Dow Jones average soaring 700 points for its biggest point gain of the year.  Investors cheered the passage of the debt ceiling bill that averted a US default, but the biggest driving factor was May’s jobs report, which showed US employers added a seasonally adjusted 339,000 jobs, far more than expected.  The data also showed a moderation in year-over-year average hourly earnings growth and a bump up in the unemployment rate to 3.7% from 3.4%, which helped push recession and rate hike fears to the back burner, at least for now.  For the week, the Nasdaq’s 2% gain notched the index’s sixth straight positive week, while the Dow also added 2% for the week, and the S&P 500 jumped 1.8%.  Meantime, European shares maintained their early gains on Friday, with the Euro Stoxx 50 rising more than 1.5% but it was still not enough to prevent the index from closing in negative territory for the week. 

Summary for 05.06.2023 

• Most Asian equity markets rose on Monday, with Japanese shares racing back to 33-year peaks and by far outpacing their global peers this year, amid optimism over economic resilience in the country and a dovish Bank of Japan. 
• European shares are primed for a steady start following Friday’s surge while US equity futures are seen little changed at this point during the day. 
• Oil prices rose sharply in early Asian trade this morning after Saudi Arabia pledged deep production cuts in July, while OPEC+ agreed to extend supply cuts into 2024.  In a weekend OPEC+ meeting, Saudi Arabia said it will cut production by about 1 million barrels per day (bpd) in July to 9 million bpd.  This in addition to the at least 3.66 million bpd cuts that the OPEC+ has rolled out since October 2022, which were extended till end-2024 from end-2023. 

• Growth in China’s services sector sped up in May, a private survey showed on Monday, as the relaxing of anti-Covid measures continued to push up consumer demand and boost employment in the services industry.  The Caixin Services purchasing managers’ index (PMI) rose to 57.1 in May from 56.4 in April, beating expectations for a reading of 55.2.  The index grew for a fifth month as the country saw a sharp rebound in tourism and other consumer-linked industries.  
• Friday’s solid jobs report added to the recent trend of analysts misjudging the strength of the US labour market.  In addition to May’s substantial numbers, the Labour Department also raised its estimates for March and April payroll growth by a combined 93,000.  Average hourly earnings rose 0.3% from April, slowing from the 0.5% increase the month before.  The unemployment rate rose to 3.7%, which was slightly higher than the 3.5% economists were expecting.   
• AT&T and other wireless phone service companies were pressured on Friday by a Bloomberg News report that Amazon is considering offering wireless service to its Prime members.  AT&T shares fell 3.6%, while T-Mobile was down 6.5% and Verizon dropped 3%. 
• AstraZeneca’s lung cancer therapy, Tagrisso, cut the risk of death by more than half in patients with a particular form of lung cancer who were diagnosed early enough to remove their tumour, trial data showed surgically.  The drug has regulatory approvals across multiple geographies for certain patients with non-small cell lung cancer. 
• After the debt deal saga, it will be a relatively quiet week in the United States, with only the ISM Services PMI factory orders, and trade data of significant importance.  Elsewhere, investors will closely follow monetary policy meetings in Australia and Canada.  Additionally, May inflation rates are set to be released in a number of key emerging markets.  Other important releases include Q1 GDP growth for Australia and Services PMI readings for Brazil, China, Spain and Italy.  Finally, labour data and retail sales figures in the Euro Area will be released in Canada.