A look at the day ahead in the US and global markets by Mike Dolan
Nvidia, the Nasdaq and the S&P500 were dizzy at record highs on Thursday as global markets took stock of a record 2024 as we approach the half-year mark next week – but with the dollar still on the rise again.
The latest US economic figures show that activity has cooled somewhat in May and June, but the trigger for the megacaps’ bounce back has not been particularly clear – not least because the Atlanta real-time ‘GDPNow’ estimate Federal Reserve continues to show solid growth of 3% for the economy. quarter.
The scale of recent progress in the tech sector may have been too rapid as the mid-year accounting provides a breather – and investors may now be preparing for a bumpier second half ahead of the US elections in November. The presidential TV debate next Thursday could sound the horn for this.
In any case, Nvidia’s 3.5% decline on the day meant it relinquished its brief role as the most valued company to Microsoft and the tech-heavy Nasdaq ended a seven-day streak of record highs.
The broader stock complex, however, was more mixed, with the blue-chip Dow Jones gaining 0.7% and the small-cap Russell 2000 flat on the day.
Despite another decline in Treasury yields following failed housing starts and unemployment claims, the dollar continued to advance.
And the dollar’s rise was quite broad-based: against European currencies, where interest rate cuts and central bank easing measures are increasing, but also against the Japanese yen and the Chinese yuan in Asia. The DXY index reached its highest point in almost two months.
Foreign money is leaving China again. Amid rising global trade tensions and little sign of an end to the deepening housing crisis there, Chinese stocks and the yuan had another bad end to a difficult week.
About 33 billion yuan ($4.54 billion) left the mainland this month through the northern part of the Stock Connect Scheme – after four months of net inflows.
With one eye on the Chinese Communist Party’s Central Committee plenum next month, G7 countries increasing pressure on China’s electric vehicle exports and Beijing considering retaliation, the yuan fell to its weakest level this year on Friday failed.
China’s Commerce Ministry said Friday that the European Union continues to escalate trade friction, which “could trigger a trade war.”
The Japanese yen is also weakening rapidly – with doubts over the timing of the Bank of Japan’s tightening reinforced by below-expected inflation figures, with consumer price growth excluding energy and fresh food falling to just 2.1% last month.
That has pushed the dollar/yen back above 159 for the first time since late April, when the BoJ last intervened to restrict the limit, prompting a fresh round of warnings from Japanese officials.
While the second interest rate cut of the year by the Swiss National Bank sounded in the background on Thursday, the dollar also rose against the European currency.
Sterling fell to its lowest level in more than a month even after the Bank of England left its policy rate steady ahead of Britain’s July 4 election, as bets on a rate cut there rose in August when the BoE signaled that its 7-2 policymaker’s split in favor of holding the line was “balanced.”
News of a recovery in UK retail sales last month after a weather-related crisis in April did little to change the stock.
And the euro fell back to the lows it reached last week on the back of political unrest in France, with business surveys for the eurozone in June showing a sharper than forecast slowdown in activity there.
The currency bloc’s services sector showed signs of weakening, while a downturn in manufacturing took a negative turn.
Back on Wall Street, equivalent S&P Global surveys for the United States will be released later on Friday.
The futures on the S&P500 were marginally in the red before the bell.
Elsewhere, China on Friday imposed countermeasures on relevant entities and senior managers of Lockheed Martin over the United States’ 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 awaits a British banking license, according to people familiar with the situation.
Key developments that should give more direction to US markets later on Friday:
* S&P Global’s June US Flash business surveys, May existing home sales; April retail sales in Canada
* 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, in the presence of Vice-President of the European Central Bank, Luis de Guindos
* US Corporate Earnings: Carmax, Factset
(By Mike Dolan, editing by Mark Heinrich mike.dolan@thomsonreuters.com)
