The US equity market is recovering from previous losses, while the USDIndex has also been held back after a period of selling pressure. The US500 has passed an important psychological level at the key 3,000. Many of the gains this week have come from the backdrop of rising world sentiment, including the increasing US-China tension.
The real focus today will return to the conditions of US employment and whether there are concrete changes that could change the paradigm of the easing session. The US unemployment rate jumped to 14.7% in April 2020, the highest in history and also better than market expectations of 16.6% due to the Covid-19 crisis causing millions to lose their jobs. Today unemployment claims data will be released with the amount still likely to be above 2 million, which is very high. Continuing claims are also continuing to increase, and maybe we can draw a conclusion by looking at this key rate, that millions of jobs might not come back at all.
The US economy shrank 4.8% on an annual basis in Q1_2020, ending the longest period of expansion in the country’s history. That is the sharpest rate of contraction in GDP since Q4_2008, far worse than market consensus of a 4.0% decline, as the pandemic forced some countries to impose lockdown measures in mid-March, costing millions of jobs. Business investment contracted for the fourth consecutive period. In addition, exports and imports fell sharply, while residential fixed investment and government spending increased. The big decline in GDP for Q1, will likely continue into Q2, but thereafter hopefully it will bounce back as soon as various countries end their lockdowns.
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Ady Phangestu
Analyst – HFIndonesia
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