Morning Minutes 6/3/2020

Morning Minutes

ADP Payolls Beat Expectations and Bank of Canada Preview

June 3, 2020

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Market Commentary By:
Colin Cieszynski, CFA, CMT
Chief Market Strategist
ccieszynski@siawm.com
+1 (647) 282-4428

Signs that economies may be stabilizing and anticipation of increased economic reopening have helped to propel markets upward overnight and into this morning. Asia Pacific trading saw Seoul gain 2.8%, Sydney climb 1.8% and Hong Kong plus Tokyo rise 1.3%.

Service PMI reports are out for Europe today and suggest economic conditions there may not be improving rapidly but they don’t seem to be getting worse either. For example, Service PMI for Germany improved to 32.6 in May from 31.4 in April which beat the 31.4 street estimate but was still well short of the 50 expansion/contraction line. Still, Frankfurt is up 2.2% today on this news (and speculation of potentially more fiscal support coming from the German government) while London is up 1.0% and Paris is up 1.8%.

US index futures have added to early gains after getting a boost from today’s ADP private sector payrolls report. The loss of 2.7 million jobs in May was significantly less than the 9.0 million in job losses the street was expecting and an improvement from the 19.5 million jobs lost in April. US index futures are up 0.3%-0.8% this morning with Dow Futures up 220 points as they look to add to yesterday’s 267-point gain. US May ISM non-manufacturing PMI (street 44.0 vs previous 41.8) and US April factory orders (street -14.0% vs previous -10.4%) are due at 10:00 am EDT.

At 10:00 am this morning, the Bank of Canada is scheduled to release its first monetary policy decision and statement under incoming Governor Tiff Macklem. Historically, governor transition meetings at central banks have been low-key affairs focused more on the setting of tone and expectations over immediate action. Based on this, the Bank may not announce new moves on monetary policy today but investors may look closely at comments in the statement and press conference for hints toward monetary policy direction, the state of the Canadian economy and the potential for future actions.

Results from Zoom Video overnight highlighted that the shift to remote work has created opportunities for some companies. Zoom Video* reported sales of $328.2M up 169% over year and above the $202M street estimate, while its EPS ($0.20 vs street $0.09) also beat expectations. Zoom’s management increased its guidance for this year to $1.21-$1.29 from $0.42-$0.45. Results from Slack, also a potential beneficiary from increased remote collaboration, are due after the close on Thursday.

*Shares of Zoom Video are held in some portfolios managed by SIA Wealth Management.

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