US Open – Wall Street higher despite historically terrible jobs report, Oil rises, Gold softens, Bitcoin momentum

US stocks are rising despite the worst monthly job loss on record.  The US economy shed 20.5 million jobs in April, slightly better than the consensus estimate of 22 million job losses.  The unemployment rate hit 14.7%, the highest since just after the Great Depression, but could have been 5 percentage points higher if workers were classified correctly. 

The job losses were widespread with leisure and hospitality payrolls shedding 7.65 million jobs.  Without a vaccine, it is hard to imagine that large parts of the economy (leisure, hospitality and retail) will recover the majority of jobs anytime soon.  The surge in wages is getting no attention as the widespread job losses were mainly hurting the lower paying ones. 

Wall Street did not learn anything new regarding the US labor situation, but one thing seems certain, price action is signaling that the majority of these job losses are expected to be short-lived.  Today’s stock market rally is mostly attributed to US-China trade negotiators pledging support for the phase-one trade deal, this was the first communication between top officials since the deal was ratified in January. 

FX

The dollar surged against the Japanese yen after the better than expected NFP report. Safe-haven currencies softened across the board along with Treasuries.

Oil

Oil prices are higher as more countries signal further curtailing of crude production and after the worst downturn for the American labor market came in slightly better than what was feared.  The NFP employment report pointed out that optimism is high for roughly 18 million job losses to be temporary, a potential sign that crude demand will pick up strongly in the US once they come out of the other side of the coronavirus.   

Oil prices seem to finally be settling on a range after a constructive two weeks of steady gains.  Energy markets are becoming confident the market will return to balance this summer and that we won’t have a repeat of last month’s contract expiry volatility. 

Gold

Gold’s fortunes revive only to be dashed by better than expected job losses in America.  Gold prices lost a little mojo after US-China trade negotiators calmed markets by standing by their phase-one trade deal and after America’s historic job loss came in better than expected.  Gold continues to hover between $1700 and $1750 as investors await to see if economic damage from COVID-19 will warrant much more stimulus in Europe and the Americas. 

Gold’s outlook is still for higher prices as the world’s largest economy will continue to struggle over the summer, signaling that much more aggressive stimulus should be coming. 

Bitcoin

Bitcoin must thank Paul Tudor Jones.  Bitcoin’s bullish momentum was supposed to be attributed to a halving event that is finally upon us, but growing institutional interest could support significantly higher prices right now.  Institutional interest died down during the coronavirus pandemic, so any inflows would be welcomed.  Paul Tudor Jones is no stranger to Bitcoin and was very successful as he pretty much nailed the top in 2017.  The founder of Tudor Investment Corp expects to use Bitcoin as a hedge against inflation, mostly benefiting from all the fiscal and monetary stimulus that is getting injected to the global economy.

Bitcoin is likely to see a ‘buy the rumor, sell the news’ reaction following the upcoming halving event.  Bitcoin could see a significant knee-jerk pullback but growing institutional interest should provide major support going forward.  After the dust settles, Bitcoin could see a strong bullish trend emerge as long financial markets do not see a second wave of COVID-19 spread across Europe and America trigger a flight-to-safety move. 

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