Moving markets today: Asian stocks rise on rate cut expectations, yen near 38-year lows; Powell said US on ‘disinflationary path’; Focus on Fed minutes, ISM services PMI, and UK elections
US stocks achieved new record highs, driven by strong performances from major technology companies. In Asia, stock markets rose on Wednesday following remarks from Fed Chair Jerome Powell that strengthened expectations of future rate cuts in the US. Meanwhile, the yen remained near its highest levels since 1986, causing caution among traders who are mindful of potential interventions by Japanese authorities. Powell commented that the US economy is moving towards a period of lower inflation, although he emphasized the need for more economic data before making decisions on interest rates. Oil prices saw a slight increase due to a significant reduction in US crude oil inventories, while gold prices remained steady as investors awaited the release of minutes from the latest Federal Reserve meeting. Investors are closely monitoring key US economic reports ahead of upcoming elections, including updates on Federal Reserve meeting minutes, the June Institute for Supply Management services sector PMI, and weekly unemployment claims. Additionally, they are anticipating reports on May job openings and June’s Nonfarm payrolls. Despite the FTSE 100 hitting a more than two-month low on Tuesday, futures indicate a positive start to trading on Wednesday. Here are five key takeaways for your day.
China’s service sector growth hits eight-month low
China’s services sector grew at its slowest pace in eight months in June, with business confidence hitting a four-year low due to weaker new order growth, according to a private-sector survey released on Wednesday. This suggests a need for further economic stimulus.
The Caixin/S&P Global services PMI dropped to 51.2 from 54.0 in May, its lowest since October 2023, but still indicated expansion for the 18th consecutive month, with the 50-mark being the threshold between growth and contraction.
Japan’s service sector contracts for the first time in two years
In June, Japan’s service sector experienced its first contraction in nearly two years due to a dip in domestic demand, according to a private survey released on Wednesday. However, business confidence and hiring remained strong.
The final au Jibun Bank Service PMI fell to 49.4 in June from 53.8 in May, breaking a 21-month growth streak, as S&P Global Market Intelligence reported. This was also lower than the initial reading of 49.8, marking the first drop below the 50.0 expansion threshold since August 2022.
Democrats increasingly question Biden’s 2024 re-election bid
On Tuesday, some Democrats loyal to President Joe Biden began voicing doubts about his 2024 re-election campaign, with one even suggesting he should step aside. This marks a shift from their earlier defence of him after his unsteady debate performance last week.
A House Democratic aide revealed that 25 House Democrats are prepared to ask Biden to withdraw if he continues to appear shaky. A recent Reuters/Ipsos poll found that one in three Democrats think Biden should not run for re-election.
What’s on the radar
As elections approach, investors are closely monitoring several key US economic reports. These include the minutes from the Federal Reserve’s latest meeting, the June services sector PMI from the Institute for Supply Management, and weekly unemployment claims. ADP will also release its monthly private sector payroll report.
In the UK, S&P Global will publish its June services sector PMI, and similar reports for the euro area’s largest economies will come out shortly before. This week is crucial for the UK, with elections on Thursday, and predictions are unfavourable for the Conservative party.
On Wall Street, several significant economic reports are anticipated, including the Federal Reserve minutes, employment data, the final S&P US manufacturing PMI, and trade deficit figures. Investors will be particularly interested in the May job openings data and the June Nonfarm payrolls report.
Asian stock markets up on speculation of rate cuts
The Dow Jones Industrial Average gained 0.41 per cent to reach 39,331.85, while the S&P 500 rose by 0.62 per cent to 5,509.01, and the Nasdaq Composite advanced 0.84 per cent to 18,028.76.
On Wall Street, major indices closed higher after a volatile trading day, driven by strong performances in consumer discretionary, financials, communication services, and consumer staples sectors. However, healthcare and energy stocks weighed on overall market gains.
Tech giants like Apple and Amazon contributed to the positive momentum, with gains of 1.6 per cent and 1.4 per cent, respectively. Tesla surged more than 10 per cent following robust quarterly sales figures.
US financial markets will be closed on Thursday for the July 4 holiday.
In Europe, futures for the EURO STOXX 50 climbed 0.26 per cent, while the FTSE 100, which closed lower by 0.6 per cent on Tuesday, indicated a rebound with futures rising 0.40 per cent to 8,183.5 points on Wednesday.
In Asia, Japan’s Nikkei 225 index increased by 0.49 per cent, approaching its previous record high set in March. Meanwhile, Chinese stocks initially declined, with the CSI300 down 0.27 per cent, while Hong Kong’s Hang Seng index edged up 0.3 per cent.
The dollar index, a measure of the dollar against major currencies, held steady at 105.66 early in Asian trading, following a slight retreat in the previous session. Sterling was unchanged at $1.2685 ahead of the UK general election, where the Labour Party is expected to win decisively.
In commodities, oil prices rose on optimism about strong fuel demand during the US summer driving season. Brent crude futures increased by 0.44 per cent to $86.62 per barrel, while US West Texas Intermediate crude futures rose by 0.41 per cent to $83.15 per barrel.
