Welcome back. As Memorial Day weekend in the US is the official start of summer, we should start to see volumes in the stock markets head lower for the next few months. On the economic front, this week we have Consumer Confidence, the Unemployment Rate, Non-Farm Payrolls and Average Hourly Earnings.
Holiday, Celebrate: Markets will be closed in the US on Monday (5/28) for Memorial Day. Markets in the UK and in China will also be closed for their respective holidays on Monday (UK Spring bank Holiday, China Dragon Boat Festival). When trading does resume, expect volumes to be lower as traders and quants are still recovering from their BBQ hangovers. Individual stocks could potentially see outsized moves if they have a lack of liquidity.
Non-Farm Payrolls & Unemployment Rate: Non-Farm Payrolls, the Unemployment Rate and Average Hourly Earnings for May are scheduled to be released this Friday (6/1). Should the figure show that the economy created more jobs than expected, or if average hourly earnings jumped higher, we will likely see the markets go higher, the US Dollar go higher and oil go lower. Should these numbers disappoint, the markets will likely go lower along with the US Dollar. If the number is strong, we could see a selloff in Treasury’s sending the yield back up.
Consumer Confidence: On Tuesday (5/29) Consumer Confidence is released. Investors will be looking to see how much of an effect the rise in oil prices has affecting consumer’s willingness to spend. A scale back in this reading could see stocks slide.
Oil: Last Friday (5/25), we saw headlines that suggested OPEC and Russia could increase supply sending the prince of oil lower. Before that, the price of oil has been hovering just below the $80 threshold, should we see any additional geopolitical concern in one of the oil producing countries, we could see Brent push above this level. With these levels, we could see stocks (outside of energy companies) fall with the additional expense especially transportation companies.
North Korea: The on again off again summit headlines could see markets bounce as we witnessed last Thursday when the markets went down over 1% on the headline that President Trump was cancelling the meeting with Kim Jung Un. The latest headlines now have potential sanctions on North Korea which could be delayed as the US sees if the summit is still on for June 12th. Should we see that they are making progress towards scheduling a meeting, the markets will go up. Should we see an even bigger falling out between Little Rocket man and the Dotard (as they called him once), the markets may go lower.
Italy: Italy is trying to form a government and how that turns out has consequences for the markets. So far it hasn’t been going that well sending European stocks lower and weakening the Euro. The best indicator of how this is going is watching Italian Bond yields. The closer they are to finding a solution, or a Euro centric coalition bond yields drop. The farther away they are or the government will be going more Euro sceptic, bond yields spike. On Friday (5/25) Italian 2 year yields had their largest 1 day rise in 5 years meaning things are not going so good.