While you were sleeping: Wall St slips

Friday 3rd June 2016

Wall Street moved lower, while US Treasuries rose, as investors assessed OPEC’s failure to agree on an output ceiling and awaited a key US government jobs report to gauge the odds the Federal Reserve might hike interest rates this month.

While members of OPEC did not come to an agreement on a new production production target, Saudi Arabia's new energy minister, Khalid al-Falih, said it did not seek to boost its output.

“There is no reason to expect that Saudi Arabia is going to go on a flooding campaign,” Falih told reporters when asked whether Saudi Arabia could accelerate production, according to Reuters. “We will be very gentle in our approach and make sure we don't shock the market in any way.”

Brent crude traded 0.6 percent higher at US$50.05 a barrel, while West Texas Intermediate was 0.5 percent stronger at US$49.23, both recovering from declines earlier in the session.

“We know it’s extremely difficult for OPEC to reach any kind of agreement because the countries don’t have the same agendas,” Pierre Mouton, who helps manage about US$9 billion at Notz Stucki & Cie in Geneva, told Bloomberg. “Maybe they would have done something if oil prices were at US$40 or below. With oil near US$50, there is less incentive.”

Wall Street slipped. In 12.02 pm New York trading, the Dow Jones Industrial Average fell 0.1 percent. In 12.12pm trading, the Standard & Poor’s 500 Index fell 0.2 percent. In 12.27pm trading, the Nasdaq Composite Index declined 0.2 percent.

The Dow moved lower as slides in shares of Apple and those of Exxon Mobil, down 1.6 percent and 1.3 percent respectively, outweighed gains in shares of Caterpillar and those of DuPont, trading 1.2 percent and 1 percent higher respectively.

Apple shares moved lower after Goldman Sachs downgraded its price target on the stock as well as its estimates for 2016 iPhone sales, citing lower growth expectations for the smartphone industry.

An ADP Research Institute report showed US private payrolls rose 173,000 last month, following a revised increase of 166,000 jobs in April. Separately, a Labor Department report showed initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 267,000 for the week ended May 28.

Investors are now awaiting the US government’s jobs data, set for release on Friday. It’s expected to show employment increased by 162,000 jobs last month after rising by 160,000 in April, while the unemployment rate fell to 4.9 percent in May, from 5 percent in April, according to a Reuters poll.

“Labour market conditions are stable, which is all the reassurance the Fed will need to act soon,” Paul Ashworth, chief US economist at Capital Economics in Toronto, told Reuters.

The Federal Open Market Committee is scheduled to start its next two-day policy meeting on June 14, which Fed officials have labelled as “live” for a potential rate hike.

“As long as job growth is north of 100,000 for May, rate hikes are still a strong possibility,” Guy Lebas, chief fixed-income strategist at Janney Montgomery Scott in Philadelphia, told Bloomberg. “Whether that’s June, July or September is a matter of fine tuning.”

In Europe, the Stoxx 600 Index finished the day with a gain of nearly 0.1 percent from the previous close.

The UK’s FTSE 100 index fell 0.1 percent, while France’s CAC 40 index retreated 0.2 percent. Germany’s DAX index eked out a 0.03 percent increase.

BusinessDesk.co.nz

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