Daily Market Color

ECB and OPEC Meetings in Focus Ahead of Tomorrow’s NFP Release

US stocks are trading close to unchanged after opening under pressure in sympathy with oil opening down, while Treasurys are rallying across the curve in quiet trading ahead of tomorrow’s closely watched monthly payrolls report.  The ECB met today and opted to keep policy on hold as it gets set to begin its previously announced corporate bond purchasing program on June 8th.  The Governing Council voted to maintain its main refinancing rate at 0%, where it’s been since March, and left its deposit rate at -0.4%.  The ECB disappointed some market pundits by leaving inflation forecasts for 2017 and 2018 unchanged, which signals that the central bank’s enlarged stimulus program has still not taken hold.  ECB President Draghi expressed some optimism, increasing his growth forecast for the Eurozone to 1.6% this year.
Market participants were also closely watching the OPEC meeting being held in Vienna.  Not surprisingly, the meeting failed to produce an agreement on output policy, with a disagreement on approach between Saudi Arabia and Iran leading the impasse.  The Saudis will only agree to freeze production if other members of OPEC do as well, and Iran has expressed an unwillingness to do so given their recent return to market oil sales.  Oil prices recovered, however, after the Saudis pledged not to flood the market with additional supply in order to gain additional market share and further punish higher cost producers.
In terms of new data, the ADP employment report showed private employers added 173,000 new jobs in May, in line with analyst expectations and up from 166,000 the month prior.  The ADP report showed job gains were broad with the exception of the manufacturing sector.  The data didn’t appear to be impacted by the month long strike by Verizon workers, even though some analysts have predicted the strike would cut 35,000+ jobs from May NFP.  Separate reports showed new applications for jobless benefits decreased last week, while planned layoffs by US employers fell 53% to a five-month low, all indicating a firming labor market. 

All three major US stock indexes are down less than 0.1%, while Treasury yields and swap rates are 1-4 bps lower across all major maturities.  Oil prices have stabilized, with both WTI and Brent crude up over 0.25% after starting the day in the red.

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