· Dollar falters as decent US data curbs haven demand
The dollar slipped on Wednesday in choppy trading, with the market having a modest appetite for risk-taking amid generally upbeat U.S. data and improving European economic numbers.
The greenback fell against currencies that perform well in times of times of risk appetite such as the Australian, New Zealand, and Canadian dollars, as well as sterling.
However, moves in the currency market have little conviction, as doubts mounted about a much-anticipated global economic recovery given the resurgence of U.S. cases of COVID-19, the illness caused by the novel coronavirus, and the threat of renewed lockdowns in U.S. states deemed hot spots.
The dollar reacted little to the ADP National Employment Report, which showed private payrolls increased by 2.369 million jobs last month. Data for May was revised upward to show payrolls surging 3.065 million, in line with a surprise rebound in job growth reported by the government, instead of tumbling 2.76 million as previously estimated.
The dollar did lose ground as a safe haven, after U.S. manufacturing data showed a reading that suggested an expansion for the month of June.
In Europe, IHS Markit’s final euro zone Manufacturing Purchasing Managers’ Index (PMI) moved closer to the 50 mark separating growth from contraction in June with transmission rates of the coronavirus falling in much of Europe and economies opening.
Germany’s manufacturing sector also contracted at a slower pace as Europe’s largest economy lifted restrictions.
In midmorning trading, the dollar was down 0.3% against a basket of currencies at 97.145.
Although the dollar has acted as a haven currency for much of the coronavirus crisis, U.S. fundamentals have played a bigger role recently, meaning it can appreciate on better-than-expected data.
Against the yen, the dollar fell 0.5% to 107.42 yen. Analysts said the yen’s rise was safe haven-related given the declining stock markets, especially in Asia.
The euro, meanwhile, rose 0.3% to $1.1258, after a rally in which the euro gained 6% against the dollar in May and early June.
· Jobs data for June could show strong rehiring ahead of the latest virus wave
Economists expect nearly 3 million jobs were created in June, as companies rehired workers they let go when the economy shut down.
The monthly employment report, to be released Thursday, is surrounded by more uncertainty than normal, after economists forecast the loss of 8 million jobs in May and the economy gained 2.5 million payrolls instead.
“At the moment, we still expect a lot of rehiring,” said Michael Gapen, chief economist at Barclays. “We know there was a lot of overfiring where firms laid everybody off with the expectation they would hire some people back.”
The strength or weakness of the employment report will also be important to the debate in Congress later this month about expanded benefits for unemployed workers. Those special benefits expire at the end of the month, and they have been providing the unemployed with an additional $600 a week and covering workers not normally included in state benefits.
Strategists expect Congress will ultimately agree to extend those benefits, though the $600 is likely to be pared down.
If the virus resurgence continues to grow and more and more of the economy shuts down, it’s possible that the jobs data could show losses again in July, she said.
· US reports second-highest day of new coronavirus cases as Arizona, California set records
The U.S. reported more than 44,700 coronavirus cases on Tuesday, the second-highest daily increase since the beginning of the nation’s outbreak, according to a CNBC analysis of data compiled by Johns Hopkins University.
The newly reported cases bring the nation’s total to more than 2.63 million cases, roughly a quarter of the globes’ near 10.5 million infections, according to Johns Hopkins.
· CORONAVIRUS CRISIS:
Ø US cases: At least 2,779,665(+50,809) and deaths: 130,790 (+668)
Ø Brazil cases: At least 1,453,369 (+44,884) and deaths: 60,713 (+1,057)
Ø Russia cases: At least 654,405 (6,556) and deaths: 9,536 (+216)
Ø India cases: At least 605,220 (+19,428) and deaths: 17,848 (+438)
· California to close indoor businesses in some counties as coronavirus cases hit record highs
California has ordered indoor businesses, including restaurants and movie theaters, to close across 19 counties as the state grapples with a resurgence of coronavirus cases, Gov. Gavin Newsom said Wednesday.
Effective immediately, businesses with indoor operations in counties that have been on the state’s “County Monitoring List” for three consecutive days will be required to close. The order applies to some of the state’s biggest counties: Los Angeles, Orange, San Bernardino and Santa Barbara.
· WHO warns some countries may have to reinstate lockdowns as coronavirus pandemic accelerates
Some countries with rapidly spreading coronavirus outbreaks might have to reinstate lockdowns and other restrictions to curb the spread of the virus, a top World Health Organization official said Wednesday.
Countries like Spain and Italy successfully drove back severe outbreaks with a comprehensive public health strategy that mobilized the public, said WHO Director-General Tedros Adhanom Ghebreyesus. However, some countries have struggled to contain the virus and many still don’t have the best systems in place to prevent another outbreak, said Dr. Maria Van Kerkhove, head of the WHO’s emerging diseases and zoonosis unit.
“Some countries who have had success in suppressing transmission who are opening up now may have a setback, may have to implement interventions again, may have to implement these so-called lockdowns again,” she said at a news briefing from the agency’s headquarters in Geneva. “We hope not. We hope that we won’t have to go into widespread lockdown again. So it’s not too late to act fast.”
· IMF says Asia’s economy will shrink ‘for the first time in living memory’ due to the coronavirus
Asia’s economy is expected to shrink this year “for the first time in living memory,” the International Monetary Fund said, warning that the region could take several years to recover.
The fund said in a blog post published Tuesday that Asia’s economy will likely contract by 1.6% this year — a downgrade from its previous forecast of no growth in April.
The region is still in a better shape compared to other parts of the world, but a weaker global economy has made it difficult for Asia to grow, Changyong Rhee, director of the Asia and Pacific department at IMF, told CNBC’s “Squawk Box Asia” on Wednesday.
He said “Asia cannot be an exception” when the whole world is suffering from the effects of the coronavirus pandemic. The IMF last month slashed its forecasts for the global economy. It projects the world economy could shrink by 4.9% this year before rebounding to grow by 5.4% next year.
· BioNTech, Pfizer vaccine 'shows potential'
A COVID-19 vaccine developed by German biotech firm BioNTech and US pharmaceutical giant Pfizer has shown potential and was found to be well tolerated in early-stage human trials, the companies say.
The drug is one of 17 being tested on humans in a frantic global race to find a vaccine the world is counting on to end a pandemic that has infected 10.5 million people and killed more than half a million so far.
The potential treatment is the fourth early-stage COVID-19 drug to show promise in human testing, along with projects involving Moderna, CanSino Biologics and Inovio Pharmaceuticals.
Bernstein analysts said their initial impression was that the data was "solid" but noted they don't expect the initial generation of vaccines to be silver bullets in terms of conferring nearly complete protection.
· Fed mulls promises for the future, appears to discount yield curve control
The Federal Reserve edged towards a longer-range plan for monetary policy at its meeting last month, raising serious questions about a strategy known as yield curve control that is untested in the United States, and signaling it may rely on explicit promises about its inflation or employment goals to steer public expectations.
Minutes from the U.S. central bank’s June 9-10 meeting indicate policymakers held a lengthy debate about the critical next steps they may take in setting monetary policy for what they hope will be a continued recovery from a pandemic-driven health and economic crisis.
“Nearly all participants indicated they had many questions regarding the costs and benefits of such an approach,” the minutes said. They then offered a long list of possible problems, from the Fed losing control of the size of its balance sheet to defend a rate target, to losing control of its independence if, for example, other monetary policy goals like controlling inflation clashed with the rate target.
Fed officials did appear to favor crafting some promises about the future - in effect making a pledge not to raise rates until some goal is met, with some of them favoring a focus on inflation and others on the unemployment rate.
· U.S. House approves extension of small business loan program
The U.S. House of Representatives on Wednesday approved an extension of a $660 billion lending program in an effort to help small businesses hit hard by the coronavirus pandemic, renewing a lifeline that had just expired.
The Senate approved the extension on Tuesday. It would keep the Paycheck Protection Program (PPP), which expired at midnight Tuesday, operating through Aug. 8. The bill, which both chambers passed on a voice vote, now goes to President Donald Trump for signing into law.
· U.S. House approves $1.5 trillion infrastructure bill but outlook uncertain
he U.S. House of Representatives approved a $1.5 trillion infrastructure package on Wednesday by a 233-to-188 vote to boost spending on roads, bridges, public transit and rail, but the White House and Senate Republicans opposed the measure.
· U.S. House passes bill to sanction Chinese banks over Hong Kong
The U.S. House of Representatives passed legislation on Wednesday that would penalize banks doing business with Chinese officials who implement a national security law that House Speaker Nancy Pelosi called a “brutal, sweeping crackdown” on Hong Kong.
The measure passed by unanimous consent, reflecting concern in Washington over China’s enactment of a security law seen as ending the autonomy that allowed the former British colony to thrive as an international financial center.
· Oil rises on U.S. crude stockpile draw, global manufacturing activity
Oil prices rose about 1% on Wednesday following a drawdown in U.S. crude inventories from record highs and a string of positive manufacturing data, but a surge in coronavirus cases tempered gains.
Brent crude rose 67 cents, or 1.5%, to $41.90 a barrel. West Texas Intermediate crude rose 44 cents, or 1.1%, to $39.73 a barrel.
U.S. crude inventories fell more than expected, dropping by 7.2 million barrels last week, after hitting all-time highs for three consecutive weeks, Energy Information Administration data showed. Analysts had expected a710,000-barrel drop.
Much of the drawdown was attributed to refiners ramping up production after reducing runs this spring because of the pandemic, as refinery utilization rates rose by 0.9 percentage point to 75.5%, their highest since early April.
Reference: CNBC, Reuters, Worldometers, Canberra Times
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