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China Tailwinds and Great Jobs Report | Morning Express 06/06/22

Posted: June 6, 2022, 8:58 a.m.

Do not miss our Top Things to Watch this Week, out every Sunday.

- China sets risk-assets on a strong course to start the week. Hang Seng +2.71%.

- Chinese regulators announce end of probe into Didi Global’s cybersecurity practices. The stock is set to open higher by 50%, but still down 83.6% from IPO day peak.

- KWEB, the China Tech ETF, is set to open at two-month highs.

- When you hear pundits talking about catching this rip in Chinese stocks, remember this ETF is still down 70% from its February 2021 peak and we bet you not a single person parading this bounce has been unscathed by the drop.

- China reopening tailwinds are also at work. Beijing now resumes in-store dining after 7-day moving average falls to 11, down from a high of 56 two weeks ago. That for Shanghai falls to 7, down from 3,028 two months ago. Also, scare in Tianjin has been avoided.

- Goldman Sachs on China reopening and supply chain bottlenecks: “Our high-frequency trackers suggest that barring another severe virus resurgence and related lockdowns, mobility, construction and ports operation could recover to pre-lockdown levels in around one month.”

- China Services PMI for May remains in deep contraction due to lockdowns at 41.4 but improved from 36.2 in April.

- Also from Goldman Sachs, "We continue to see the US economy on a narrow path to a soft landing."

- All things considered, a great jobs report on Friday.

- Headline job growth beat at 390,000 versus 325,000 expected and April was revised higher.

- Wage Growth was in line with estimates YoY at 5.2%, but MoM was soft at +0.3% versus +0.4%.

- Participation Rate up-ticked as people coming back to the workforce.

- Manufacturing jobs missed at 18,000 versus 40,000 but did not contract, relative to what ISM and ADP would have suggested.

- Economic calendar starts the week of slowly, but builds into Chinese Trade Balance Wednesday night, ECB policy meeting Thursday, Chinese inflation Thursday night, and then a big U.S. CPI read for May released Friday morning.

- Amazon’s 20-for-1 stock split takes effect today.

 

E-mini S&P (June) / NQ (June)

S&P, yesterday’s close: Settled at 4107.00, down 68.25 on Friday and 48.75 on the week

NQ, yesterday’s close: Settled at 12,551.00, down 342.75 on Friday and 126.75 on the week

- We find Friday’s Nonfarm Payroll report to be favorable for stocks, despite the reaction to finish out the week.

- Soft MoM Average Hourly Earnings opens the door for Federal patience, ultimately, adding emphasis to CPI. Remember, April and May were never meant to be an inflection point for inflation. May data due Friday.

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NQ (June)

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Crude Oil (July)

Yesterday’s close: Settled 118.87, up 2.00 on Friday and 3.80 on the week

- A whipsaw week found stable and directional footing late Friday to trade 120.46 and finish the electronic session at 120.26, after settling at 118.87.

- Price action on its back foot this morning, surrendering the $120 mark last night.

- Pressuring the tape is news that Libya’s El Sharara oil field restarted after force majeure since April 18th.

- Venezuelan Crude Oil gets okay from White House.

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Gold (August) / Silver (July)

Gold, yesterday’s close: Settled at 1871.4, up 22.7

Silver, yesterday’s close: Settled at 22.275, up 0.36

- Gold and Silver fell sharply from resistance on Friday, after strong jobs report. These major three-star resistance levels must be watched closely upon re-test.

- Although jobs report was seen as strong, we do not believe it to speed-up the Fed’s tightening timeline.

- U.S. 10-year yields spiked to 2.986% on Friday, before abating, and now retesting.

- U.S. Dollar Index still more than 3% from recent highs, and sideways since jobs report.

- Silver is leading the precious metals complex higher and finding tailwinds from China, trading to a one-month high.

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Silver (July)

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