Is the stock price a bubble? Will the risk-on market continue!? "What to watch on June 3 and the events schedule"

Yesterday the stock prices rose again, with no particular catalysts in sight.

Starting from a pace where stocks began to rise due to worries that the prior pessimistic environment might have been a false impression, it seems buying has fed on itself, pulling in those who had been selling, causing a sharp stock rally.

Not only stock prices but also in the currency market, bond market, and commodity futures market, a risk-on atmosphere has taken hold, and risk assets are being bought.

◎ Today’s Focus

1) Risk On

There are many risk-off factors such as deteriorating US-China relations over the Hong Kong national security law, protests in the US over Black Lives Matter, and the spread of the coronavirus, but since markets had priced in too much risk-off and did not move as much toward risk-off as expected, a reversal is occurring.

Also, the global rise in stock prices is providing a tailwind.

Today, it remains to be seen whether this trend will continue.

2) Economic Indicators

Australia Quarterly GDP

It is GDP for January–March, i.e., GDP before there was a full lockdown.

The truly bad figures will come in April–June, so all eyes are on how badly the January–March quarter figures deteriorate as a prelude.

ADP Employment Report

As a prelude to the NFP employment data released at the weekend, focus on how badly the ADP numbers deteriorate.

Last month’s figure was -20.24 million, this month’s forecast is -9 million; attention is on whether the actual figure beats or misses expectations and by how much it diverges.

ISM Non-Manufacturing Activity Index

Personal consumption accounts for a large portion of US GDP, and the ISM Non-Manufacturing Index reflects the sentiment of service sectors linked to consumer spending.

Last month’s figure was 41.8; this month’s forecast is 44.0, so watch whether last month marks a bottom.

Canada Policy Rate Announcement

With expectations for the Bank of Canada to hold steady, attention centers on the statement.

With the governor stepping down and new BoC Governor Macklem taking office, this will be the first policy decision meeting under the new governor, so focus on his stance (dovish or hawkish).

Eurozone Indicator Rush

In Europe, revisions for service PMI and composite PMI are being released one after another.

Because they are revisions, unless there is a large deviation from expectations, the market reaction is likely to be limited.

Also in Germany and the euro zone, unemployment figures will be released; weak numbers could trigger euro reactions.

However, with the ECB Council meeting tomorrow and expectations surrounding the Covid-19 recovery fund, those factors are likely to be stronger in moving the euro than the indicators released, so euro moves due to economic indicators may be limited.

3) Brexit Negotiations

Yesterday some reports indicated that the UK might concede in trade talks with the EU.

As a result, the pound has risen.

With the EU summit on the 19th looming, talks between the UK and EU are at a critical stage in the run-up to a potential deal.

If a path toward a deal within the year can be established, or if talks lead to an extension of the negotiation deadline, that could push the pound higher.

Conversely, if reports suggesting a no-deal exit or reports that deny yesterday’s reports emerge, the pound could fall, so exercise caution.

◎ Today’s Economic Calendar

Wednesday, June 3

10:10 AUD RBA Assistant Governor Speaking

10:30 AUDAustralia Quarterly GDP (1Q–3Q)

10:45 CNY Caixin Services PMI

16:00 TRY Turkish CPI (Consumer Price Index)

16:45 EUR Italy Services & Composite PMI (revised)

16:50 EUR France Services & Composite PMI (revised)

16:55 EUR Germany Services & Composite PMI (revised); Unemployment rate

17:00 EUR Eurozone Services & Composite PMI (revised)

17:00 EUR Italy Unemployment Rate

17:30 GBP UK Services & Composite PMI (revised)

18:00 EUR Eurozone Unemployment Rate

21:15 USDADP Employment Report

22:45 USD US Services & Composite PMI (revised)

23:00 USDISM Non-Manufacturing Index

23:00 CADCanada BoC Policy Rate Announcement

23:30 USD Crude Oil Inventories

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