ADP Report, Didi, UK GDP, OPEC Meeting - What's Moving Markets

© Reuters.

By Peter Nurse

Investing.com --The ADP employment report is due, Didi starts trading in New York, crude pushes higher as OPEC members debate production increases while Wall Street awaits the end of a positive half year. Here's what's moving markets on Wednesday, June 30th.

1. ADP jobs data looms

All eyes later Wednesday will be on the release of the ADP National Employment Report, for clues about the Labor Department's more comprehensive, and closely watched employment report on Friday. 

The Federal Reserve has made it pretty clear that it is looking for more progress in the U.S. labor market before it starts to rein in its massive bond-buying program, or even considers looking at higher interest rates.

The ADP report may have a poor track record predicting the private payrolls count in the employment report, but it’s still seen as an important gauge. The consensus is looking for 600,000 additional private sector jobs, a slowdown from 978,000 jobs recorded last month.

Weekly mortgage applications and pending home sales data are also due to be published later Wednesday. 

Earlier in the day, growth in China's June manufacturing Purchasing Manager's Index easing slightly to 50.9, a four-month low, versus 51.0 in May.

Euro zone inflation cooled in June, with consumer prices rising 1.9% from a year earlier, down from a two-year high of 2% in May, easing the pressure on the European Central Bank.

2. Stocks seen lower as first half ends

U.S. stocks are seen opening marginally lower Wednesday, consolidating as a positive first half of the year comes to an end.

By 6:55 AM ET, Dow Jones futures were down 80 points, or 0.2%, S&P 500 futures were 0.2% lower and Nasdaq 100 futures dropped 0.2%.

Wednesday is the last day of the second quarter and final day of the first half of 2021. So far on the year, the S&P 500 is up 14%, while the Nasdaq Composite and the Dow Jones Industrial Average are up 12% apiece. 

The S&P 500 and the Nasdaq Composite both closed Tuesday at record highs.

Investors have bought into the idea of a strong economic recovery from the pandemic, largely shrugging off high inflation readings and expecting conducive monetary and fiscal conditions to continue for some time.

There are a handful of earnings due Wednesday which could be used to judge the overall state of the economy. Micron Technology (NASDAQ:MU) will give a glimpse into the state of chip makers; Constellation Brands (NYSE:STZ) and General Mills (NYSE:GIS), our food and alcohol consumption; and Bed Bath & Beyond (NASDAQ:BBBY), the extent to which we are still spending on the home.  

3. Didi to make NYSE debut

Didi, China’s biggest ride-hailing company, is set to make its debut on the New York Stock Exchange later Wednesday, after pricing its initial public offering.

Didi sold about 317 million American depositary shares on Tuesday, around 10% more than originally planned, at $14 each, resulting in the company collecting $4.4 billion. This would give Didi a market value of more than $67 billion.

The price was at the top of the $13-$14 range, and the additional shares sold indicated strong demand despite the company being firmly in Beijing’s crosshairs amid an antitrust probe into China’s internet goliaths.

Didi’s IPO comes in a year that’s on track to set a record for first-time share sales, with almost $351 billion raised to date.

Additionally, Cybersecurity firm SentinelOne was seen selling 35 million shares for $35 each on Tuesday, above the $31-$32 marketed range that the cybersecurity firm had previously lifted from $26 to $29 on Monday.

4. UK 1Q GDP falls more than expected

Britain’s economy shrank by more than expected in the first quarter of this year, as restrictions put in place to fight the Covid-19 pandemic closed many retail outlets.

Data from the Office for National Statistics showed gross domestic product contracted by 1.6% in the January-March quarter, a bigger drop than the previous estimate of a 1.5% fall.

This paled in comparison to the 20% slump in the second quarter of 2020 when Britain was in its first lockdown, as the successful vaccination program and companies ramping up their online presences limited the damage.

Still, the Covid-19 pandemic, and the growth of the delta variant, isn’t the only factor impacting the British economy. The U.K. still has a frosty relationship with the European Union, its largest trading partner, five years after voting to leave the bloc.

The two sides are still struggling to find a long-term solution to the trade difficulties over Northern Ireland, with the British province still in a customs union with the EU, as part of the Northern Ireland protocol, while the rest of Britain is now outside it.

Additionally, JP Morgan opened its new trading hub in Paris on Tuesday, as France tries to lure finance workers looking to leave London after Brexit.

5. Crude rises on delay to OPEC talks

Crude oil prices rose Wednesday, boosted by uncertainty over the extent to which top producers will agree to increase supply to the market later this week.

By 6:55 AM ET, U.S. crude was up 1.1% at $73.77 a barrel, while Brent was up 0.8% at $74.87.

Ministers of the Organization of Petroleum Exporting Countries and its allies, a group known as OPEC+, delayed preliminary talks by one day to allow more time to resolve differences over production policy.

The group is widely expected to announce an increase in output for August with oil prices surging to two-year highs, gaining around 50% from the start of the year.

That said, the growth of Covid cases caused by the virulent delta variant is obviously causing differences in opinion over whether to allow higher production or to continue with the current cautious approach.

And even if OPEC+ does boost supply by more than expected, it will not reach inventories in time to alleviate the tight market, according to Goldman Sachs.

“Ultimately, much more OPEC+ supply will be needed to balance the oil market by 2022,” analysts at Goldman said, in a note.

Adding to the positive tone, the American Petroleum Institute reported late Tuesday that U.S. crude supplies fell 8.15 million barrels last week, which would be the largest inventory decline since January if confirmed by the U.S. Energy Information Administration later in the session.