A Day Ahead View in US and Global Markets by Mike Dolan
Nvidia, the Nasdaq and the S&P500 were all giddy at record highs on Thursday as world markets began to take stock of an excellent 2024 as we approach the half-year period next week – but with the dollar back on the march anyway.
The latest US economic readings show some cooling in activity throughout May and June, but the trigger for the mega-cap pullback was far from clear – particularly with the Atlanta Federal Reserve’s real-time “GDPNow” estimate still showing a rapid growth of 3% for the quarter.
The scale of recent tech gains may have been too rapid as mid-year accounting brings pause – and perhaps investors are now bracing for a more turbulent second half of November’s US elections. Next Thursday’s presidential debate on TV could sound the horn for that.
Either way, Nvidia’s 3.5% drop on the day meant it once again ceded its brief role as most valuable company to Microsoft and the tech-heavy Nasdaq ended a seven-day streak of record closes.
The broader equity complex was more mixed, however, with the Dow Jones gaining 0.7% and the small-cap Russell 2000 flat on the day.
Despite another slowdown in Treasury yields following failed housing starts and unemployment benefit claims, the dollar continued to gain strength.
And the dollar’s gains have been quite widespread – against European currencies, where central bank rate cuts and easing bets are increasing, but also against Japan’s yen and China’s yuan in Asia. The DXY index reached its highest level in almost two months.
Foreign money is again pouring out of China – amid rising global trade tensions and few signs of an end to that country’s deepening housing crisis, Chinese stocks and the yuan had another bad end to a dismal week.
Around 33 billion yuan ($4.54 billion) left the mainland this month through the Northern strand of the Stock Connect Scheme – after four months of net inflows.
With an eye on the Chinese Communist Party’s central committee plenum next month, G7 countries increasing pressure on Chinese electric vehicle exports and Beijing considering retaliation, the yuan fell to its weakest level this year on Friday. fair.
China’s Ministry of Commerce said on Friday that the European Union continues to increase trade friction, which “may trigger a trade war.”
Japan’s yen is also weakening rapidly again – with doubts about the timing of the Bank of Japan’s tightening reinforced by lower-than-expected inflation figures, which have caused consumer price growth, excluding energy and fresh food, to fall to just 2.1% last month.
That sent dollar/yen back above 159 for the first time since late April, when the Bank of Japan last intervened to limit it, and prompted another series of warnings from Japanese officials.
With the Swiss National Bank’s second interest rate cut of the year on Thursday ringing in the background, the dollar also rose against European currencies.
The British pound fell to its lowest level in more than a month, even after the Bank of England kept its policy rates stable ahead of the 4th of July elections in the United Kingdom, as bets on a cut Rates in August rose when the BoE indicated that its 7-2 policymaker’s split in favor of holding the line was “finely balanced.”
News of a recovery in British retail sales last month, following a weather-related slump in April, did little to change course.
And the euro fell again to the lows reached last week due to political unrest in France, with June business surveys for the euro zone showing a more pronounced slowdown in activity than expected.
The currency bloc’s services industry showed signs of weakening, while the recession in manufacturing worsened.
Back on Wall Street, equivalent surveys from S&P Global for the United States will be released later on Friday.
S&P500 futures were slightly in the red before the bell.
Elsewhere, China imposed countermeasures on relevant entities and senior executives at Lockheed Martin on Friday over US arms sales to Taiwan.
And British financial technology company Revolut could be valued at more than $40 billion in a share sale even as it still awaits a U.K. banking license, according to people familiar with the situation.
Key developments expected to provide further guidance to US markets later on Friday:
* June US Flash Business Surveys from S&P Global, May Existing Home Sales; Retail sales in Canada in April
* San Francisco Federal Reserve President Mary Daly speaks
* German Economy Minister Robert Habeck speaks in Beijing
* ECOFIN meeting of European Union finance ministers in Luxembourg, with the participation of the vice-president of the European Central Bank, Luis de Guindos
* US corporate earnings: Carmax, Factset
(Reporting by Mike Dolan, Editing by Mark Heinrich mike.dolan@thomsonreuters.com)
