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Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates

Global market indices

US Stock Indices Price Performance

Nasdaq 100 +1.01% MTD +9.81% YTD
Dow Jones Industrial Average +0.16% MTD +2.81% YTD
NYSE -0.43% MTD +6.84% YTD
S&P 500 +2.72% MTD +13.65% YTD

The S&P 500 is +1.25% over the past week, with 5 of the 11 sectors showing positive performance MTD. The Equally Weighted version of the S&P 500 posted a weekly -0.17%, its performance is -0.37% MTD and +4.36% YTD.

The S&P 500 Information Technology sector is +8.46% MTD +26.82% YTD, while the Energy sector is -4.08% MTD, while still being +6.11% YTD.

The S&P 500 and the Nasdaq Composite reached new record highs for the third consecutive session on Wednesday, buoyed by easing inflation data that strengthened investor confidence in a potential Fed rate cut this year.

The S&P 500 advanced +0.85% yesterday, marking a YTD gain of +13.65%, while the tech-heavy Nasdaq Composite was +1.01%. Conversely, the Dow Jones Industrial Average experienced a marginal decline of -0.16%, losing 35 points.

The prospect of lower interest rates had a particularly positive impact on shares of smaller companies, which typically allocate a greater proportion of their operating profits toward debt reduction compared to their larger counterparts. The Russell 1000 index consequently was +1.63%.

Leading the gains within the S&P 500 was the Information Technology sector. Apple shares continued their upward trajectory, rising +2.86% and achieving a new all-time high. Intraday, the company briefly surpassed Microsoft's market capitalisation of $3.24 trillion for the first time in five months, hitting $3.29 trillion, before ultimately settling below it. Apple was boosted this week after it announced Apple Intelligence, an AI offering for iPhones.

Oracle shares were +13% following the announcement of new AI partnerships with Microsoft, Alphabet, and OpenAI. Broadcom raised its annual forecast for revenue +10% on Wednesday due to increasing demand for its custom AI chips and announced a stock split to take advantage of a rally in its shares this year. Shares were +12% in extended trading. The company expects $11 billion in revenue from AI-linked chips in 2024, up from its previous forecast of $10 billion. Caterpillar raised its dividend by approximately 8% and augmented its share buyback program by $20 billion, citing strong performance from its heavy-duty machinery division.

US stocks

Mega caps: A positive week for the ‘Magnificent Seven’ as investors continued not to be deterred by high interest rates. Apple +8.78%, Microsoft +4.02%, Amazon +3.09%, Meta Platforms +2.78%, Nvidia +2.25%, Alphabet +1.36%, and Tesla +1.31%.

Energy stocks had a negative week this week as the Energy sector itself was -0.55%, with the sector’s YTD performance at +6.11%. Marathon Petroleum -2.97%, ExxonMobil -1.94%, Phillips 66 -1.00%, Chevron -0.49%, and ConocoPhillips -0.04%, while Halliburton +3.23%, Baker Hughes +1.54%, Apa Corp (US) +1.14%, Shell +0.99%, and Occidental Petroleum is +0.77%.

Materials and Mining stocks had a negative week, as the materials sector was -0.87%, with the sector’s YTD performance at +4.50%. Copper prices were -0.82% this week. Albemarle is -5.06%, Nucor -4.48%, Mosaic -3.64%, Sibanye Stillwater -3.53%, Freeport-McMoRan -2.55%, CF Industries -2.15%, Yara International -1.54%, and Newmont Mining is -0.27%.

Prices of most base metals have fallen in response to the prospect of the Federal Reserve cutting interest rates only once this year and later than previously expected.

European Stock Indices Price Performance

Stoxx 600 +0.91% MTD +9.17% YTD
DAX +0.72% MTD +11.22% YTD
CAC 40 -1.60% MTD +4.26% YTD
IBEX 35 -0.68% MTD +11.32% YTD
FTSE MIB -0.39% MTD +13.20% YTD
FTSE 100 -0.72% MTD +6.24% YTD

European equities have had a slightly positive performance this week despite initially falling on Monday following the European parliamentary election, as the Stoxx 600 increased +0.32% with the Technology sector leading +3.35%, while the Telecom sector declined the most by -2.75%.

On Wednesday, London's FTSE 100 index concluded the trading day up +0.83% at 8,215.48. This week the FTSE 100 declined -0.38%.

France’s CAC 40 also experienced weekly declines, closing -1.77% lower, as French President Emmanuel Macron called a snap election following his party’s defeat in the European Parliamentary elections, while Germany's DAX was up +0.30% this week.

In Wednesday's session, the Financial Services and Banking sector demonstrated strength, with notable gains among Southern European lenders, excluding BBVA, following its downgrade to "underperform" from "neutral" by BNP Paribas. French banks experienced volatility ahead of the snap elections called by French President Macron. British and Irish banks also trended higher, with Bloomberg reporting HSBC's intention to acquire an additional 31% stake in HSBC Jintrust Fund Management from Shanxi Trust for approximately CNY 1 billion. Nordic banks also posted gains, led by Sydbank after raising its FY24 Profit Before Tax forecast to DKK 2.80 - 3.10 billion from the previous range of DKK 2.50 - 2.90 billion.

In the Industrial Goods & Services sector, M&A activity took centre stage. Rentokil shares surged following a report that Nelson Peltz's Trian Fund Management had acquired a significant stake in the UK-listed pest-control firm.

The Autos & Parts sector experienced a substantial decline following reports that the European Commission plans to impose additional duties of up to 25% on imported Chinese electric vehicles (EV) starting next month. Additionally, Umicore shares dropped sharply after issuing a profit warning, becoming the latest supplier to be negatively impacted by the slowing EV market.

Other Global Stock Indices Price Performance

MSCI World Index +2.06% MTD +10.95% YTD
Hang Seng -0.78% MTD +5.22% YTD

This week, the Hang Seng Index is down -2.64%, while the MSCI World Index is up +0.94%.

Currencies

EUR -0.30% MTD -2.07% YTD to $1.0811
GBP +0.46% MTD +0.52% YTD to $1.2797

The euro was -0.56% against the USD over the past week, while the British Pound was +0.10%.

The British pound rose by +0.44% on Wednesday, reaching $1.2797. The euro was +0.65%, reaching $1.0811.

Market sentiment indicates a probability of 70% for a 25 bps reduction in the BoE's interest rates by the September meeting, while around 35 bps of rate cuts are priced in this year. 

The euro was hit by Sunday’s European parliamentary elections and the uncertainty it raises in relation to future fiscal policies, debt levels and stability within the eurozone bloc. The euro has also fallen as its share of global foreign exchange holdings fell last year to a three-year low of 20% as noted in a report issued by the ECB on Wednesday. Other countries cut euro assets in their central bank reserves by about €100 bn last year, a drop of nearly 5%. By contrast, the shares of the US dollar, Japanese yen and other non-traditional reserve currencies increased. This drop may, as noted by the Financial Times, be attributed to concerns that plans to use frozen Russian assets to finance Ukraine could further erode the euro’s appeal. The ECB stated that, “Sanction-related measures might be relevant to the share of the euro in global foreign exchange reserves going forward.” However, despite the drop in portfolio holdings, the euro does remain the second most important currency in the international monetary system.

The Dollar Index this week is -0.49%, however it maintains a gain of +0.04% MTD +3.33% YTD.

Cryptocurrencies

Bitcoin +1.06% MTD +62.36% YTD to $68,181.00
Ethereum -5.41% MTD +54.96% YTD to $3,557.90

Bitcoin and Ethereum over the past week, -4.08% and -8.00%, respectively. However, Bitcoin, Ether and other cryptocurrencies rallied on Wednesday after US inflation data came in slightly below expectations, boosting hopes that the Federal Reserve would start cutting interest rates later this year.

US Spot Bitcoin ETFs saw a daily net outflow of $64.93 million on Monday, ending their longest inflow streak of 19 days. Cumulative total net inflows to Spot Bitcoin ETFs reached $15.522 billion by 12 June according to data from SosoValue.

Note: As of 5:30 pm EDT 12 June 2024

Fixed Income

US 10-year yield -17.9 basis points MTD +44.2 basis points YTD to 4.323%.
German 10-year yield +14.0 basis points MTD +52.2 basis points YTD to 2.531%.
UK 10-year yield -1.9 basis points MTD +59.2 basis points YTD to 4.131%.

US Treasury 10-year bond yields rose by +4.3 basis points (bps) this week, reaching 4.323%. However, US Treasury yields experienced a decline on Wednesday following the release of cooler-than-expected CPI data, which bolstered hopes that the Fed would start monetary easing by September. 

However, yields rose after the Fed, as anticipated, maintained interest rates and indicated a potential delay in rate cuts until as late as December. Officials also projected only a single quarter-percentage-point reduction for the year. Yields climbed further during Chair Jerome Powell's comments following the announcement.

Market expectations for a rate cut by the Fed in September moderated somewhat after the Fed statement, with CME's FedWatch Tool indicating a 63.5% probability of a rate cut of at least 25 basis points, down from roughly 70% in the wake of the inflation data.

The 10-year US Treasury note was -8.2 bps following on from the Fed’s announcement and new dot plot projections. The two-year US Treasury yield, which typically aligns with interest rate expectations, was -7.6 bps, reaching 4.758% after falling to 4.67%, its lowest level since 5th April.

The benchmark German 10-year yield was +1.6 bps yesterday, while the UK 10-year yield was -5.4 bps to 4.131% this week. The spread between US 10-year Treasuries and German Bunds currently stands at 179.2 bps, a widening of +2.7 bps from 176.5 bps last week.

Italian bond yields, a benchmark for the eurozone periphery, experienced an increase of +10.6 bps to 3.925%. Consequently, the spread between Italian and German 10-year yields widened +9.0 bps to 139.4 bps last week from 130.4 bps last week.

The French 10-year yield experienced a decline of -8 bps, settling at 3.16%. This followed a recent peak of 3.338% on Tuesday, its highest level since November.

The spread between French and German bonds, a key indicator of the risk premium investors require for holding French debt, widened slightly to 61.7 bps. This followed a widening to 66.9 bps the previous day, marking its widest point since March 2023.

Money markets price just under 40 bps of further ECB rate cuts by year-end, implying a second rate cut, likely in September or October, and around a 50% chance of a third move.

Commodities

Gold spot +0.56% MTD +13.27% YTD to $2,336.00 per ounce.
Silver spot -2.07% MTD +23.76% YTD to $29.81 per ounce.
West Texas Intermediate crude +1.16% MTD +8.32% YTD to $77.87 a barrel.
Brent crude +1.74% MTD +7.11% YTD to $82.52 a barrel.

Gold prices, which had been on the rise earlier in the day, experienced a moderation of gains on Wednesday following the Fed's interest rate announcement, it settled 0.2% higher. Spot gold prices are down -0.77% this week.

IEA predicts global oil demand peak by 2029, diverging from OPEC outlook. The International Energy Agency (IEA) announced on Wednesday that global oil demand is projected to peak by 2029 and begin to contract the following year, despite increased supply from the US and other non-OPEC nations, resulting in a significant surplus this decade.

The IEA revised its earlier prediction of peak oil demand by 2030, advancing the date to 2029. This outlook diverges from OPEC's, which anticipates demand growth continuing well beyond 2029 due to a slower transition to cleaner fuels and has not forecast a peak. On Tuesday OPEC maintained its outlook for 2024 demand growth at 2.25 million bpd and 1.85 million bpd for 2025.

According to the IEA's annual report, oil demand growth will plateau at 105.6 million barrels per day (bpd) by 2029 before experiencing a slight contraction in 2030, driven by increased electric vehicles usage, improved efficiency, and a shift away from oil in power generation.

Additionally, the IEA projects supply capacity to reach nearly 114 million bpd by 2030, exceeding projected demand by a substantial 8 million bpd. Non-OPEC producers, led by the US, are expected to account for three-quarters of this capacity increase.

IEA Executive Director Fatih Birol emphasised the significance of these projections, stating, "This report's projections, based on the latest data, show a major supply surplus emerging this decade, suggesting that oil companies may want to make sure their business strategies and plans are prepared for the changes taking place."

Demand growth will be primarily driven by emerging economies in Asia, particularly road transportation in India and jet fuel and petrochemicals in China.

The projected supply glut will have broader implications, particularly for OPEC nations relying heavily on oil revenues for government income. The IEA noted, "Spare capacity at such levels could have significant consequences for oil markets – including for producer economies in OPEC and beyond, as well as for the US shale industry."

In a separate report, the IEA also revised its oil demand growth forecast for 2024 downward by 100,000 bpd to 960,000 bpd, attributing the adjustment to sluggish consumption in developed countries. A muted economy and increased uptake of green energy are expected to result in 1 million bpd growth next year.

Note: As of 5:30 pm EDT 12 June 2024

Key data to move markets this week

EUROPE

Thursday: Spanish Harmonised Index of Consumer Prices and eurozone Industrial production.
Friday: Eurogroup meeting and speeches by European Central Bank Vice President Luis de Guindos, Chief economist Phillip Lane, Executive Board Member Isabel Schnabel and President Christine Lagarde.
Saturday: A speech by ECB Executive Board Member Isabel Schnabel.
Monday: Eurogroup Meeting, Italian CPI, eurozone labour cost, and Bundesbank Monthly Report.
Tuesday: Eurogroup Meeting, German ZEW Current Situation and Economic Sentiment surveys, eurozone Harmonised Index of Consumer Prices, eurozone Core Harmonised Index of Consumer Prices, and eurozone ZEW Economic Sentiment survey.

UK

Friday: Consumer Inflation Expectations.
Wednesday: CPI, PPI, and RPI.

US

Thursday: Initial and Continuing Jobless Claims and PPI.
Friday: Michigan Consumer Sentiment Index, UoM 5-year Consumer Inflation Expectations, Fed Monetary Policy Report, and speeches by Chicago Fed President Austan Goolsbee and Fed Governor Lisa Cook.
Monday: NY Empire State Manufacturing Index and a speech by Philadelphia Fed President Patrick Harker.
Tuesday: Retail Sales and Industrial Production.
Wednesday: US markets closed for Juneteenth holiday.

CHINA 

Monday: Industrial Production and Retail Sales.

JAPAN

Friday: Bank of Japan (BoJ) Interest Rate Decision and Monetary Policy Statement.
Tuesday: BoJ Monetary Policy Meeting Minutes, Exports, Imports and Merchandise Trade Balance.

Global Macro Updates

Energy prices drive down inflation. The May Consumer Price Index (CPI) report revealed inflation cooling, with the core CPI +0.2% m/o/m, lower than the consensus forecast of +0.3% and marking the lowest increase since August 2021. On an annualised basis, core inflation reached +3.4%, slightly below the expected +3.5%. The headline CPI remained unchanged m/o/m, contrary to expectations of a 0.1% increase, and represented the lowest level since May 2020. Annualised headline inflation settled at +3.3%, lower than the +3.4% consensus forecast.

Energy prices, primarily driven by gasoline, contributed significantly to the deflationary trend, -2% m/o/m. Some analysts suggest that the May declines in gasoline prices, combined with expectations for increased discounting on consumer goods, could signal further weakening in June's CPI data.

However, shelter inflation remained persistently high, along with food away from home. Shelter costs were +0.4% m/o/m for the fourth consecutive month, becoming the primary factor contributing to elevated core inflation. Additionally, May CPI figures may be artificially low due to unsustainable declines in airline fares (known for their volatility) and car insurance.

Following the report, Fed funds futures now indicate a 60% probability of a 0.25 percentage point rate cut in September, up from 50% before the data release.

Fed holds rates steady as inflation forecasts revised upwards. Fed officials signalled a cautious approach to monetary policy, projecting only one interest-rate reduction for this year. The Fed, as widely anticipated, held its Fed funds rate steady in a range between 5.25% and 5.5%.

New economic projections revealed that 15 of 19 officials anticipate a rate reduction this year, with the group roughly divided between one or two cuts. The median projection reflected an expectation of one reduction, tempering investor hopes for a September cut, which had risen following the positive inflation report.

Fed Chair Jerome Powell acknowledged the recent improvement in inflation readings during a news conference, stating, "We’ve made pretty good progress on inflation." He characterised Wednesday's CPI report as "a step in the right direction… but you don’t want to be too motivated by any single data point." Powell further emphasised the need for "more good data" before considering rate cuts.

Despite Powell's cautious tone, many investors remained undeterred, with benchmark 10-year Treasury yields dropping to 4.323%, extending June's bond rally. However, the new rate projections raised the long-run "neutral" rate needed to keep inflation in check to 2.8% from 2.6%. The long-run rate has now moved up more than a quarter of percentage point over the Fed's last two sets of projections. This may indicate that inflation will be harder to bring down in the future than was previously expected.

Ultimately, 15 officials predicted a rate cut this year, with eight estimating two cuts, seven anticipating one cut, and four forecasting no cuts at all. No officials projected three cuts, compared to nine in March. Officials also maintained their previous outlook of no rate increases in 2024. 

Powell, highlighting the officials' cautious approach to modelling inflation, twice described the inflation forecasts underpinning the rate projections as "conservative." fficials will have one more inflation reading before their next policy meeting in July and three more monthly reports before the following meeting in mid-September. The September meeting is the Fed's last gathering before the 5th November presidential election.

Fed officials revised their inflation projections upward, now anticipating core prices to rise 2.8% in the fourth quarter from a year earlier, up from 2.6% in their March projections. They foresee core inflation slowing to 2.3% next year and 2% thereafter. "Recent indicators suggest that economic activity has continued to expand at a solid pace. Job gains have remained strong, and the unemployment rate has remained low," the Fed said in its statement.

The unemployment rate is expected to hold steady at 4.0% in 2024, consistent with the previous forecast. It is projected to increase slightly to 4.2% in 2025 before declining to 4.1% in 2026.

The Fed maintained its previous forecast for US economic growth, with an expected annualised pace of 2.1% this year, followed by a slight decrease to 2.0% in 2025 and remaining at that level through 2026.

Brussels sparks trade war fears with China. The European Commission has decided to impose provisional tariffs on imported Chinese electric vehicles (EVs) ranging from 17% to 38%, effective next month. These duties, which will be applied in addition to the existing 10% tariff on all Chinese EVs, are contingent upon the extent to which the companies complied with an EU anti-subsidy investigation initiated in September.

Major exporters like BYD and Geely will face additional tariffs of 17% and 20%, respectively. European brands manufacturing EVs in China, such as Mercedes Benz and Renault, will incur a 21% tariff, while Tesla may be subject to an individually calculated rate. Companies deemed to have not cooperated with the probe, including SAIC, will be subject to the highest rate of 38%.

Valdis Dombrovskis, EU trade commissioner, emphasised the necessity of these measures in response to the surge in imports of heavily subsidised Chinese battery EVs, stating that it poses a risk to the EU's industry. He expressed openness to discuss alternative solutions with Beijing in the weeks leading up to the definitive imposition of duties on 4th July.

China's commerce ministry expressed strong dissatisfaction with the EU's decision, deeming it "ill-informed and lawless," and vowed to take necessary measures to protect Chinese companies' rights. They criticised the EU for politicising economic and trade issues and fabricating claims of subsidies.

The tariffs, advocated for by France, are expected to generate substantial revenue for the EU budget as Chinese EV sales in Europe continue to grow. China, the EU's largest trading partner, exported €10 billion worth of EVs to the EU in 2023.

Despite China's attempts to persuade EU member states to oppose the tariffs, there is reportedly broad support for the measures within the EU. Dombrovskis highlighted the significant increase in the market share of EVs imported from China, citing evidence of Chinese carmakers and suppliers receiving subsidised loans, tax breaks, and cheap land.

The tariffs have raised concerns among some EU member states, including Germany, Sweden, and Hungary, due to fears of Chinese retaliation and potential negative impacts on their automotive industries. However, a majority of member states would be required to overturn the decision, and the tariffs are set to be voted on before 2nd November. The suggested increase in tariffs follows last month’s announcement by the US when it announced section 301 tariffs increasing from 25% to 100% in 2024 and levies being imposed on semiconductors, batteries, solar cells, and critical minerals, in addition to increases on steel, and aluminium.

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