Asia Morning Briefing: Could 3AC and Terraform be Blamed for Singapore's Crackdown on Offshore Crypto Firms?

Key Points

• Initial jobless claims remained at 248,000 for the week ending June 7, unchanged from the prior week and above economists' expectations of 242,000.
• Continuing claims rose to 1.956 million, the highest since November 2021, indicating longer periods of unemployment for those out of work.
• Recent labor market data shows signs of cooling, with May nonfarm payrolls at 139,000, down from April, and private sector job growth at a two-year low.
• The slowing labor market and cooling inflation have increased speculation about potential Federal Reserve interest rate cuts, with a 25% chance by July.
• Analysts warn of potential policy mistakes by the Fed if inflation trends do not align with expectations, given the current economic uncertainty.

Summary

The latest Department of Labor data reveals a cooling US labor market, with initial jobless claims holding steady at 248,000 for the week ending June 7, surpassing economists' forecasts of 242,000. Continuing claims climbed to 1.956 million, the highest since November 2021, suggesting that unemployed individuals are struggling to find new jobs. This data aligns with other indicators of a slowing labor market, including May's nonfarm payrolls of 139,000, a decline from April, and the lowest private sector job growth in over two years at 37,000, per ADP data. Revisions also showed fewer jobs added in prior months than initially reported. Amidst cooling inflation, these labor trends have fueled discussions on Federal Reserve interest rate cuts, with traders now estimating a 25% chance of a cut by July, up from 19% previously. Economists like Neil Dutta from Renaissance Macro highlight rising continuing claims as a sign of increasing unemployment and declining hiring rates, even if layoffs remain stable. Dutta also cautions that the Fed's wait-and-see approach could lead to significant policy errors if inflation does not behave as anticipated, underscoring the high uncertainty in the current economic landscape.

Key Points

• Boeing stock (BA) dropped nearly 8% in premarket trading after an Air India Boeing 787-8 Dreamliner crashed near Ahmedabad airport, carrying 242 people.
• This is the first major crash involving a Boeing 787 Dreamliner since its introduction in 2011, with over 200 bodies recovered from the site.
• Boeing expressed support for Air India and extended thoughts to those affected by the tragedy.
• The crash adds to Boeing's challenges, despite a 20% year-to-date stock rise under new CEO Kelly Ortberg, following a tumultuous 2024 with safety and production issues.
• Shares of Boeing suppliers like GE Aerospace and Spirit AeroSystems also fell in premarket trading, by 4% and 3% respectively.

Summary

Boeing's stock (BA) fell nearly 8% in premarket trading after an Air India Boeing 787-8 Dreamliner crashed shortly after takeoff near Ahmedabad airport, carrying 242 people. The flight, headed to Gatwick Airport in London, marks the first major crash of a Dreamliner since its 2011 debut. Over 200 bodies have been recovered, with survival unclear. Boeing issued a statement supporting Air India and expressing condolences. This incident is a significant setback for Boeing, which has been recovering under new CEO Kelly Ortberg with a 20% year-to-date stock increase, despite a challenging 2024 following a "door plug" incident on an Alaska Airlines flight that led to lawsuits, investigations, and a leadership overhaul. The company also faced scrutiny after fatal 737 Max 8 crashes in 2018 and 2019, exposing software flaws and resulting in a global grounding. The Ahmedabad crash further impacts Boeing's reputation, with shares of suppliers like GE Aerospace and Spirit AeroSystems also declining in premarket trading by 4% and 3%, respectively.

Key Points

• Market Reaction to Trump's Posts: President Trump's social media posts about trade deals, such as the recent one on a China deal, no longer significantly impact markets as they did a month ago.**
• Shift in Market Focus: Investors are now more focused on economic data and Federal Reserve actions, rather than trade policy updates, with a cooler-than-expected May consumer price index boosting expectations for interest rate cuts.**
• Trade Policy Uncertainty: While trade policy uncertainty has decreased from its peak, tariffs remain a persistent factor, with effective rates around 15%, and strategists are not expecting a return to pre-tariff levels.**
• Economic Resilience: Despite ongoing tariffs, Wall Street remains optimistic about the US economy's resilience, shifting attention to the Fed's potential rate cuts based on cooling inflation and a stable labor market.**
• Fed's Role: Upcoming Federal Reserve decisions and Chair Jerome Powell's statements are anticipated to be critical in determining market direction, with hopes for rate cuts driven by positive economic indicators.**

Summary

This article from Yahoo Finance's Morning Brief highlights a significant shift in market dynamics, where President Trump's social media posts on trade deals, like the recent China agreement announcement, no longer sway markets as they did previously. On Wednesday, despite Trump's post, major index futures remained largely unaffected, with investor attention turning to economic data instead. A cooler-than-expected May consumer price index report fueled optimism for Federal Reserve rate cuts, possibly twice this year, signaling a move away from trade war dominance. Strategists note that while trade policy uncertainty has lessened, tariffs persist at around 15%, and markets are adapting to this reality by focusing on US economic resilience. The Federal Reserve's trajectory, alongside cooling inflation and a stable labor market, now takes center stage, with recession fears fading. Upcoming Fed decisions and Chair Jerome Powell's comments are poised to test market expectations for policy easing driven by positive economic trends rather than labor market distress.