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[Quick Facts]

1. OPEC and non-OPEC oil-producing countries reach an agreement on oil output cuts.

2. The Fed may raise rates by 50bps in July if no rate hikes this month.

3. Non-farm payrolls in May show the labor market remains strong.

4. U.S. debt crisis comes to an end.

[News Details]

OPEC and non-OPEC oil-producing countries reach an agreement on oil output cuts

OPEC and non-OPEC oil-producing countries held a meeting in Vienna on June 3-4, local time, reaching an agreement on oil output cuts after difficult talks. The oil output cut agreement already reached between OPEC and non-OPEC oil producers in 2023 will be extended to the end of the year, according to the statement issued after the meeting. Those countries agreed that OPEC and non-OPEC oil producers would adjust their daily crude oil production to 40.463 million barrels per day (bpd) from January 1, 2024, to December 31, 2024, which is a downward adjustment of about 1.4 million bpd compared with the current production.

The Fed may raise rates by 50bps in July if no rate hikes this month

Lawrence H. Summers, former U.S. Treasury Secretary, said the Federal Reserve should be open to raising its benchmark interest rate by 50 basis points in July if the central bank pauses its round of policy tightening this month. The overheated economy is once again the main risk the Fed needs to watch out for. Summers said the employment data in May released last Friday was generally strong. While the unemployment rate jumped to 3.7% from 3.4% in April, data from the household survey from which the jobless figures are drawn can be noisy, especially in May when schools let out.

Non-farm payrolls in May show labor market remains strong

The U.S. non-farm payrolls added 339,000 jobs in May, significantly exceeding market expectations, indicating that demand in the job market remains strong and that the marginal slowdown did not ultimately lead to a cooling of demand. Continued job growth shows that the market remains resilient.

Overall, it was a strong non-farm report on jobs. While the labor force, unemployment, and illegal immigration increased, the number of newly unemployed people decreased. It suggests that most of the newly unemployed people got jobs, so the unemployment rate was not driven up. The number of the re-unemployed (the unemployed who have worked before and who can be easily replaced) increased. This depends on how tough the policy is on illegal immigration. Perhaps the supply side will continue to improve, but this one-legged approach can not fully address the current imbalance in the job market.

U.S. debt crisis comes to an end

U.S. President Joe Biden signed a bill on the federal government's debt ceiling and budget on June 3, local time, making it official and temporarily preventing the U.S. government from falling into debt default. The bill suspends the debt ceiling until the beginning of 2025 and limits spending in 2024 and 2025. It was the 103rd adjustment of the debt ceiling since the end of World War II.

Biden's signing of the bill gives the Treasury permission to resume new debt issuance after a hiatus of several months, allowing the Treasury to resume its cash in hand to a more normal level. It's a replenishment process that could involve well over $1 trillion in new debt issuance and could have unintended consequences. For example: draining liquidity from the banking sector, raising short-term financing rates, and tightening the economy. At the same time, many economists believe the U.S. economy is headed for recession.

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