Stock futures in the United States are trading flat today as investors await the release of the June jobs report—the US NFP. As inflationary concerns rise and unemployment falls, stock traders are rigorously analyzing updated economic data to determine how soon the Federal Reserve will change its monetary policy and begin tapering its stimulus.
Initial claims for unemployment benefits exceeded expectations, coming in at 364,000 for the week ending June 26, compared to the 390,000. The updated figure fell by 51,000 from the previous week, making it the lowest since the pandemic began. Today’s payroll data should be scrutinized by investors to get a sense of what to expect in the coming months.
Investors expect nonfarm payrolls to rise by 706,000 new jobs in June, compared to 559,000 new jobs in May, and unemployment to fall from 5.8% to 5.6%. The average hourly wage has increased by 3.6% in the last year and by 0.3% month to month.
Investors should closely monitor changes in average hourly wages for signs of an unexpected increase that could contribute to an increase in inflation. Labor costs are one of the most significant costs for businesses in the United States, and wage increases may cause inflation as businesses pass on cost increases to their customers.
As rising inflationary pressures are one of the major factors that could affect ultra-loose monetary policy, a wage increase that leads to higher inflation could persuade the hawks to act and pull the brakes on monetary support.
In yesterday’s session, the Dow Jones Industrial Average jumped 0.38% and the S & P 500 index rose 0.52%.The Nasdaq, the tech-savvy index, surged 0.13%, and the Russell 2000, the small-cap index, increased by 0.81%.
It is important to note that the reason behind the rising interest of institutional investors in crypto currencies can be seen through the performance of Robinhood this year. In its initial public offering, Robinhood, a popular exchange among retail investors, stated that Dogecoin contributed nearly 34% of its transaction revenue and 6% of total revenue in the first quarter. Moreover, cryptocurrencies account for 17% of the overall revenue of the company. This reported performance of the company may encourage more firms to enter the crypto market, thereby potentially increasing the value of digital currencies.
Gold and the US Dollar
Gold prices are highly likely to be immensely volatile on the back of the US NFP data. This is the most important economic event for this week, and going forward, it is going to set the tone for the gold price as well. There is no doubt in saying that gold prices have been oversold for some time and a bounce back is due. However, if the US NFP data overwhelms investors, we could see a further selloff in the gold prices today.
Overall, gold price is trading at its lowest level since 2016, a lot of this mainly due to the strength in the dollar index which is gathering more strength. Fed’s monetary policy is the main denominator here. An increase in interest rates raises the opportunity cost of holding a non-interest-bearing precious metal.
However, investors should keep in mind that, due to concerns about the increase in child cases caused by the Delta variant, investors have recently considered gold as a safe haven investment.
The members of the oil cartel clashed yesterday, with the United Arab Emirates (UAE) blocking the agreement until the baseline for its production cuts was adjusted. This forced the group to postpone the meeting, raising concerns about the supply of oil in the coming months. The impasse between the UAE and the rest of the group could mean that oil supply will not be increased at all under the current terms until April 2022, pushing oil prices even higher and contributing to the already concerning spike in inflation. The price of oil has surpassed $75, the highest level in the last three years.
Global Minimum Tax Rate
Treasury Secretary Janet Yellen announced yesterday that 130 countries had reached an agreement on a global minimum tax rate for large corporations that are taking advantage of low-tax jurisdictions. According to the plan, countries will tax corporations based on where they do business and generate revenue, rather than where they are headquartered. According to reports, the agreement also includes an end to the digital services tax aimed at technology companies. Investors should keep in mind that rising taxes are likely to have a negative impact on company earnings and, as a result, future performance in stock markets.
Asian Stock Markets
The Asian Pacific markets are mixed today. The Nikkei 225 index in Japan jumped 0.29% in morning trade, and the Shanghai Composite Index fell nearly 1.67%. As of 11:20 p.m. EST, the ASX 200 index rose 0.39%, and Seoul’s Kospi had hopped 0.14%.