By Daniel Shvartsman and Ana Beatriz Bartolo
Investing.com – All eyes in the market are on the US May Nonfarm Payrolls report, which is expected to show continued strong hiring but comes after a week of warnings from the company or executives. Elon Musk and Tesla are the latest big names to enter the latter category with a leaked email suggesting a major job cut. OPEC+ has finally responded to the sharp rise in oil prices with increased production plans. In Brazil, the government tries to increase spending, but the economic team is against it.
Here’s what you need to know for the financial markets on Friday, June 3rd.
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1. US jobs report – payroll
Every jobs report is great, and even more so since the 2020s to date. The US May comes at an important moment as it lifted prices and starting this week began quantitative tightening. Expectations are that the US economy added 325,000 jobs in May, down from 428,000 last month and the 6-month average of 402,000, but still a considerable number. Meanwhile, the price is expected to drop to 3.5%, its pre-pandemic low.
With the Fed still locked in a plan to continue the declines, it’s hard to imagine what in the jobs report might change that trajectory. At the same time yesterday, the number missed expectations with just 128,000 jobs added, and warnings from the private sector continue apace, leaving investors bracing for a turnaround in the economy.
At 11 am, the US Purchasing Manager’s Index (PMI) readings will be released. They are expected to show continued economic expansion with readings above 50, but slower expansion than in April. Amid reports such as Dimon’s comments contrasting with those of Bank of America (NYSE:) (SA:) CEO Brian Moynihan, who is more optimistic about the consumer and therefore the economy, the additional data on where US economic activity will really be watched closely.
2. Public calamity decree for returning
Political pressure for a new public calamity decree gains strength as Economy Minister Paulo Guedes tries to avoid measures that could increase public spending ahead of the October elections. President Jair Bolsonaro is looking for a way to make a fuel subsidy possible, to prevent high prices from harming his reelection campaign.
The government would use the possibility of “shortage of diesel” in the country to justify the measure. In this way, it would also be possible to have the “legal comfort” to increase programs that could improve Bolsonaro’s position in opinion polls in the short term.
The Chief Minister of the Civil House, Ciro Nogueira, evaluated in an interview with CNN that the declaration of the state of calamity is not necessary at the moment, but he also did not completely discard it.
On the other hand, the government’s economic team, in addition to not seeing the basic requirements to authorize out-of-ceiling expenses, fears that the decision could be questioned by Organs controlling bodies and that the green light for spending would deteriorate confidence in economic policy, which would have a bullish impact on and inflation.
At 8:14 am, the EWZ ETF was up 0.73% at $35.80 on the US premarket.
3. Elon Musk considers layoffs
Reuters reported that in an internal email, CEO Elon Musk called for a cut of about 10% of Tesla’s (NASDAQ:) (SA:) workforce. Musk cited a “very bad feeling” about the economy and spoke about concerns that a recession could be coming. This comes after Musk asked all Tesla employees to work in the company’s relevant offices at least 40 hours a week and implies small growth at the very least for the electric vehicle maker.
This warning comes after a week in which JP Morgan CEO Jamie Dimon spoke of a hurricane, cryptocurrency companies Coinbase Global Inc (NASDAQ:) (SA:) and Gemini imposed a freeze on hiring or rescinded offers or layoffs, and Microsoft (NASDAQ:) (SA:) lowered guidance for the current quarter. This serves as a reminder that despite the recent stock market rally and whatever the number of jobs this morning, there are doubts in the market.
CHECK: US stock quotes
4. Oil falls as OPEC+ plans to increase
OPEC+ met expectations for a production increase at its meeting yesterday, planning to increase production by 50% in July and August. As of 8:16 am, U.S. crude oil futures were down 0.73% to $116.02 a barrel, while oil futures were down 0.71% to $116.78.
That oil plummets so low suggests this was to be expected, or that a number of other factors – the end of the Shanghai lockdown, a tie in US inventories and the European embargo on Russian oil – could continue to support oil prices in the US. next months.
At 1 p.m. Baker Hughes reports and come out, giving a weekly gauge on US shale drilling and its rise amid sustained higher energy prices.
5. Reactions to earnings raise questions about pricing
A number of large US-based companies reported earnings yesterday, and the responses raised questions about what is already priced into market prices after a turbulent start to the year.
RH (NYSE:), the designer furniture retailer that was one of the first to warn of slowing consumer spending, beat estimates but lowered its guidance. Okta (NASDAQ:), a security software company, grew nearly 17% in premarket trade after beating expectations for both this quarter and guidance.
The recent mid-May bottom rally has led to questions about whether we are in a bear market rally or whether the market has actually found a bottom. The mixed results and reactions, especially in hotter sectors such as technology and retail, suggest that there is still much to discover in an individual company, and that the proverbial ‘stock pickers’ market may be upon us.
At 8:20 am, the 100 futures were down 1.05%, while the A and A futures were down 0.66% and 0.44%, respectively.