US sharemarket surge sets up NZX for strong start to week

Saturday, 6 June 2020

Last month, more than 25 per cent of people in the US aged between 16 and 24 were out of work.

United States share markets surged to near record highs on the back of better-than-expected unemployment numbers and the New Zealand dollar has traded above US65 cents for the first time since January.

A 'V-shaped' recovery of US shares – or what may turn out to be the first half of a 'W-shaped' downturn – was all but completed on Saturday.

That was despite the number of new coronavirus cases globally reaching an all-time high of 130,529 on Friday, taking the total number of active cases worldwide to a record of just over 3.1 million.

The technology-rich US Nasdaq index closed at 9814 on Saturday morning, New Zealand time, just three points shy of the record close of 9817 it set in February.

The S&P500 index which covers a broad range of stocks surged 2.6 per cent to within 7 per cent of its all-time record.

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The jump came after the US Bureau of Labour Statistics reported a surprise drop in the US unemployment rate to 13.3 per cent in May, which was down from 14.7 per cent in April.

The New Zealand dollar is trading above 65 US cents for the first time since January.

The decline was entirely due to a reduction in 'furloughed' workers, who were taken back on by their former employers as coronavirus restrictions eased across the US, according to bureau.

The number of people who were unemployed in the US after being temporarily laid off fell by 2.7 million to 15.3 million.

But the number of Americans who were unemployed after being let go permanently by their employers rose by 295,000 during the month to 2.3 million.

The New York Times economic correspondent Neil Irwin cautioned that 'historical evidence from severe economic crises and the data available today' pointed to enormous delayed effects from the cornavirus pandemic.

'The fabric of the economy has been ripped, with damage done to millions of interconnections between workers and employers, companies and their suppliers, borrowers and lenders,' he reported.

The US share market recovery nevertheless appears to set up a strong start to the trading week on Monday for the New Zealand share market, where the NZX50 is now down only 8 per cent on its February record.

The New Zealand dollar – which tends to rise and fall with swings in global economic sentiment – leapt more than 3 US cents and one British pence last week, also edging up 0.3 Australian cents.

That puts the kiwi at five-month highs against the US dollar and the pound.