As we enter a long weekend in the US and UK, European markets appear to be improving at the end of the week, after a negative week for equities in general.
Europe
Today’s more positive mood seems to be driven by some optimism that we could see the framework for a debt ceiling agreement start to unfold, with more details expected to emerge over the course of the day. of the weekend, while we focus on the 1 of next week.st June deadline.
THE FTSE100 has seen a modest recovery from levels last seen on 29e March, with the main winners being basic resources, thanks to a rebound in commodity prices.
AstraZeneca is also helping to boost the UK index after announcing positive results for its drugs Lynparza and Imfinzi in a Phase 3 Duo-E trial for the treatment of advanced endometrial cancer.
The sectors that have been hardest hit this week are those that are likely to be most susceptible to a recession or at the very least stagflation, with weakness in homebuilders, as well as general retailers. These are still underperforming today, although the FTSE100 is seeing a modest rebound.
The sharp rise in gilt yields seen over the past week weighs on Persimmon, Taylor Wimpey and Barratt Developments as consumers grapple with the prospect of higher mortgage refinancing costs, while general retailers are hit by concerns about declining sales. volumes with Frasers Group JD Sports, owner of B&Q Kingfisher and Next all under pressure.
WE
US markets are higher today, with the Nasdaq100 again leading the way, after the latest core PCE inflation data edged up in April to 4.7%. On a more positive note, personal spending rebounded strongly to 0.8% from 0.1%, a sign that while inflation remains stubbornly persistent, the US consumer remains remarkably resilient.
Therefore, today’s numbers keep the prospect of another 25 basis point rate hike by the Federal Reserve on the table for their June meeting.
The tech rally we saw yesterday still looks resilient with Marvell Technology see strong gains after saying he expects revenue to skyrocket on the back of the AI boom. Nvidia shares, which managed to post 25% gains yesterday, appear to be taking a breather, but with the shares already up 160% year-to-date, it could just be a break as they climb. accustomed to the new altitude as we head into the weekend.
Gap The shares rose after reporting a surprise C$0.01 first-quarter profit, helped by a significant cost cut. Sales fell 3% across all major retailers’ brands, including Banana Republic and Old Navy. Net sales were $3.28 billion, down 6%, although the company was able to reduce inventory levels by 27% from the same period last year, while margin gross exceeded expectations at 37.1%
Effects
Today’s stronger than expected core PCE inflation figure saw the US dollar rebound from its lows of the day, but it still remains sharply higher this week as markets become more certain that the Fed will rise again in June. Of course, there’s another payrolls and CPI report by then, so there’s still room for a break. As for the prospect of rate cuts, these continue to be assessed for this year and into 2024.
The worst performer this week was the New Zealand Dollar after this week’s surprise rise and the RBNZ’s hold advice. We also saw weakness in commodity currencies, on concerns over slowing global growth and falling copper prices, which hit 7-month lows earlier this week.
The pound had a mixed week, falling against the U.S. dollar but managing to hold its ground against almost everything else, as traders priced ahead of several more Bank of England rate hikes, a said Chancellor of the Exchequer Jeremy Hunt. that a recession would be a price to pay if it lowered inflation. If rates stay at current levels, he might just get his wish. However, while many economists are banking on the prospect of much higher rates, it is likely that we will not reach 5.5% if the Fed halts its hike over the next two months. The PPI is already much lower, between 4% and 5%, and where the PPI goes, the CPI tends to follow. Inflation may start to come down on its own, it may take a bit longer as the Bank of England was slow to get out of traps over 12 months ago.
The latest retail sales figures for April were better than expected, but it should be noted that we have seen downward revisions to figures from previous months, which would indicate that demand is likely to remain weak for some time, in particular given the increase in the cost of living seen in April and May in the form of council tax bills and other utility bills, with the exception of energy bills which are expected to start to rise decrease during the summer.
Goods
Crude oil prices are on the rise again and look set to post their second straight weekly gain as they continue to pull away from the lows seen earlier this month. We saw a big drop yesterday on comments that OPEC+ was unlikely to cut production next month, but the risk of further big drops is somewhat mitigated by the fact that markets know the US government is a buyer below $70 as it looks to fill the SPR by the end of the summer.
Despite today’s firmer yields, gold prices manage to hold up reasonably well today, although it should also be mentioned that we are breaking out of 2-month lows as higher yields erode the appeal of yellow metal.
Volatility
NVIDIA stock found itself in the spotlight on Wednesday night after results reflected the business benefits of the AI revolution. Stocks rallied 25% on Thursday, pushing the market capitalization to nearly $1 trillion and offering some reading for other tech stocks as well. One-day theft was 104.86%, compared to 55.09% for the month.
NVIDIA is the largest constituent of CMC’s automation and robotics basket, so it’s no surprise that this cohort rose on the open and then posted further solid gains in Thursday’s session. AMD and Cadence Design also posted double-digit percentage gains, boosting one-day theft on the basket to 44.59% from 27.68% for the month.
This frenzy around the technology sector unsurprisingly sparked interest in the NASDAQ which once again proved to be the most active stock market index of the session. One-day theft stands at 20.19% against 15.67% for the month.
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