Morning Minutes

Mixed Markets Digest Weak US ADP Payroll and Auto Sales Data




Although US index futures are up 0.3% to 0.5% this morning, today’s bounce has not been able to erase all of yesterday’s US declines of 0.50% to 0.75% for the major indices. European indices are also indecisive this morning with the Dax up 0.8% but the FTSE down 1.0%.

Investors continue to weigh the implications of inflation-pressured hawkish central banks and a softening US economy. Yesterday the Bank of Canada raised its benchmark rate by 0.50%, continued Quantitative Tightening, then commented that the “Governing Council is prepared to act more forcefully if needed to meet its commitment to achieve the 2% inflation target”. With central banks in Canada and New Zealand hiking rates recently, the pressure appears to be on the European Central Bank, who meets next week, and the FOMC, who meets later this month, to potentially follow suit.

Meanwhile signs of a weakening US economy continue to emerge. This morning ADP private sector payrolls for May came in well below expectations (128K vs street 300K), while April payrolls were revised downward (202K vs previous 247K). These were the two worst months for ADP payroll growth since April of 2020. The impact of higher interest rates, supply chain disruptions, and tightening credit conditions appears to have taken their toll on May US auto sales numbers with Honda and Toyota reporting sales declines of 57.3% and 27.3% from a year ago.

WTI crude oil has dropped 0.9% this morning and is trading just below $115.00/bbl ahead of today’s OPEC+ decision. Reports have been circulating in the media overnight that Saudi Arabia may be prepared to step up and offset any lost Russian production curtailed by sanctions or other issues in a bid to keep control over the oil price and the supply side. Meanwhile, some other commodities are soaring today. Both natural gas and copper are up 3.8% today.  

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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