· Dollar turns higher as focus turns to surging coronavirus cases
The U.S. dollar rose on Thursday, regaining its safe-haven appeal, as investors focused on the resurgence of U.S. coronavirus cases and raised concerns the economy would give back the summer’s employment gains.
Earlier in the session, the dollar fell as risk appetite increased after data showing the world’s largest economy defied expectations for a second month in a row, creating jobs in June at a far faster pace than market forecasts.
But that optimism waned as reports of more U.S. cases of COVID-19 emerged.
Florida reported more than 10,000 new coronavirus cases on Thursday, the biggest one-day increase in the state since the pandemic started, according to a Reuters tally.
The number of cases nationwide shot up by nearly 50,000 the day before, the fourth record rise in infections in the last seven days, following moves in many states to allow businesses to reopen from strict shutdowns aimed at containing the pandemic.
The dollar hit session lows against the euro and held onto losses against a major currency basket after data showed that U.S. nonfarm payrolls increased by 4.8 million jobs in June, the most since the government started keeping records in 1939. Payrolls rebounded 2.699 million in May. Economists polled by Reuters had forecast payrolls increasing by 3 million jobs in June.
The unemployment rate, meanwhile, fell to 11.1% last month from 13.3% in May. The report had diminished the dollar’s appeal as a safe haven.
In midday trading, the dollar index rose 0.2% to 97.31, as the euro fell 0.2% versus the greenback to $1.1226.
Despite the dollar’s recent spell of weakness, the greenback was still about 2.5% from the 2020 low of 94.6 in the dollar index hit in early March. A Reuters poll predicts more weakness for the greenback over the next 12 months due to weak global demand.
The dollar gained 0.1% against the yen to 107.58 yen.
· Fed balance sheet shrinks further, and still no Main Street loans
The U.S. Federal Reserve’s massive stash of bonds and other assets slipped for a third straight week to its smallest size since mid-May, data released by the central bank on Thursday showed.
Meanwhile, the central bank has still made no loans under its two-week old Main Street lending facility, meant to extend easy credit to small and mid-sized businesses that cannot get it elsewhere, the data showed.
It is not entirely clear why, amid a deep and steep recession, the loans have not drawn more interest. When the Fed first proposed it, staff worked urgently on standing it up as thousands of letters poured in with suggestions for how to make it more useful. The central bank tweaked its plan in response to many of those suggestions.
As of July 1, the Fed’s total balance sheet size declined by about $74 billion to $7.06 trillion versus $7.13 trillion a week earlier, led by a roughly $50 billion fall in outstanding currency swaps with foreign central banks.
That was a fifth straight weekly drop and a signal of an easing U.S. dollar crunch that had been an early feature of the financial strains caused by the coronavirus crisis.
Repurchase agreements fell to $61 billion, the lowest since the Fed restarted intervening in short-term lending markets in September.
· Weekly jobless claims rise more than expected in final week of June
The number of Americans filing for unemployment benefits for the first time rose more than expected last week as a resurgent coronavirus added pressure to the U.S. economy.
The Labor Department said Thursday that initial jobless claims rose by 1.427 million. Economists polled by Dow Jones had expected a rise of 1.38 million for the week ending June 27.
This marked the 15th straight week in which initial claims remained above 1 million.
· U.S. job growth roars back, but COVID-19 resurgence threatens recovery
The U.S. economy created jobs at a record clip in June as more restaurants and bars reopened, but 31.5 million Americans were collecting unemployment checks in the middle of the month, and a resurgence in COVID-19 cases suggested the labor market could suffer a setback in July.
Nonfarm payrolls surged by 4.8 million jobs in June, the most since the government started keeping records in 1939. Payrolls rebounded 2.699 million in May after a historic plunge of 20.787 million in April.
Record spikes in new coronavirus infections in large parts of the country, including Arizona and the highly-populated states of California, Florida and Texas, have forced several jurisdictions to scale back or pause reopenings, and send some workers back home.
· U.S. military coronavirus cases surge as Pentagon lifts travel restrictions
The number of U.S. active-duty military personnel infected with the coronavirus has more than doubled in the past three weeks, a revelation that comes as the Pentagon lifts travel restrictions and shelter-in-place orders.
On June 10, the Pentagon reported 2,807 U.S. service members tested positive for coronavirus. Twenty-two days later, that figure that has now spiked to 6,493 cases, according to figures published by the Defense Department.
Since the coronavirus emerged, the Pentagon has reported a total of 18,071 cases; of those, 12,521 are active-duty military, 2,644 are civilians, 1,740 are dependents and 1,166 are contractors. These figures include 8,683 recoveries and 38 deaths across the entire department.
The surge in new cases comes as the Pentagon lifts travel restrictions for Defense Department personnel in 48 states as well as eight host nations, including Germany, Japan, South Korea and the United Kingdom.
· Japan’s middle class is ‘disappearing’ as poverty rises, warns economist
As poverty rises in Japan, the country’s middle class is slowly eroding away, according to a recent report by Oxford Economics’ Shigeto Nagai.
“After the bubble burst in the 1990s, income has declined across the income percentiles, and the share of low-income households has risen as those of middle- and high-income groups shrink,” Nagai, who is head of Japan economics at the firm, wrote in the report.
Japan’s poverty rate stands at 15.7%, according to the latest figures from the Organization for Economic Co-operation and Development. That metric refers to people whose household income is less than half of the median of the entire population.
“The middle class is disappearing in Japan, albeit gradually,” Nagai warned.
· Oil jumps 2% on U.S. economic data, posts second weekly gain in three
Oil prices rose on Thursday after data showed a fall in U.S. unemployment and a sharp drop in crude stockpiles, although concerns that a spike in U.S. coronavirus infections could stall a recovery in fuel demand kept gains in check.
U.S. non-farm payrolls increased by 4.8 million in June, the Labor Department reported on Thursday, beating expectations.
Brent crude futures gained $1.11, or 2.64%, to settle at $43.14 per barrel, after rising 1.8% in the previous session.
West Texas Intermediate crude futures gained 83 cents, or 2.08%, to settle at $40.65 per barrel, adding to a 1.4% rise on Wednesday.
U.S. crude inventories fell 7.2 million barrels from a record high last week, far more than analysts had expected, U.S. Energy Information Administration data showed, as refiners ramped up production and imports eased.
· Oil demand to return to pre-pandemic levels by 2022, Goldman says, but unlikely to peak this decade
Analysts at Goldman Sachs expect global oil demand to return to pre-pandemic levels by 2022, citing a pick-up in commuting, a shift to private transportation and higher infrastructure spending.
In a research note published Thursday, analysts at the U.S. investment bank estimated global oil demand would decline by 8% in 2020, rebound by 6% in 2021 and “fully recover” to pre-coronavirus levels by 2022.
Reference: CNBC, Reuters
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