2024-06-06 10:11

A look at the day ahead in U.S. and global markets from Mike Dolan Wall Street's tech-led stock surge to new records has seen $3 trillion AI-champion Nvidia (NVDA.O) New Tab, opens new tab replace Apple (AAPL.O) New Tab, opens new tab as the world's 2nd most valuable company in a market infused with interest rate cut excitement across the G7. With the European Central Bank set to follow the Bank of Canada on Thursday with its first interest rate cut of the cycle, four countries of the G7 economic bloc will be in easing mode - with two more coming down the pike later this year. Balancing them all, currency markets are taking it on the chin - with the euro and Canadian dollar relatively serene on the foreign exchanges despite the moves. That's mainly because Federal Reserve rate cut speculation is stirring again too. Having gone from pricing at least 6 cuts in 2024 at the start of the year to just one last week, Fed futures markets are now settling on two quarter-point reductions - starting in September before the election. A sweep of U.S. labor market reports this week support the argument that the economy is cooling, with the nationwide payrolls update on Friday set to be the decider and with updates on weekly jobless claims and May layoffs due on Thursday. But the report that really catalyzed the latest equity surge to new records was the ISM service sector survey for last month that both doused concerns about a stalling of the economy and encouraged hopes for ongoing disinflation. Although sister surveys for manufacturing show sign of spluttering, the service sector bounced back sharply in May, with its 'prices paid' component easing and employment reading still in contraction. Something for everyone perhaps - certainly enough to catapult the S&P500 (.SPX) New Tab, opens new tab and Nasdaq (.IXIC) New Tab, opens new tab to new all-time highs in its best day for over a month and drag 10-year Treasury yields to their lowest since April 1. The VIX 'fear index' is subdued below 13 and S&P futures held the gains ahead of Thursday's bell. The scores going into the half-year point are 2024 gains to date of over 12% for the S&P500, more than 14% for the Nasdaq and 4.5% for the equal-weighted S&P (.EWGSPC) New Tab, opens new tab. All that shows is that tech and its relentless artificial intelligence theme are dominating once again. Bagging a $3 trillion market cap price-tag for the first time that leaves it second only to Microsoft (MSFT.O) New Tab, opens new tab following a 147% stock surge this year, Nvidia hit new highs and pulled all the AI complex of firms up with it. Part of the latest scramble is because Nvidia is preparing to split its stock ten-for-one, effective on Friday, and those holding stock at the market close today will qualify for nine additional shares in the chip group. In a possible shot across the bows, however, the New York Times reported that the U.S. Justice Department and the Federal Trade Commission have reached a deal that allows them to proceed with antitrust investigations into the dominant roles that Microsoft, OpenAI and Nvidia (NVDA.O) New Tab, opens new tab play in the AI industry. Other earnings-related surges included gains of more than 10% on Wednesday for cybersecurity firm Crowdstrike (CRWD.O) New Tab, opens new tab and Hewlett Packard Enterprise (HPE.N) New Tab, opens new tab, with the latter flagging strong demand for its AI servers. But the tech fizz wasn't just on Wall Street. Shares in Dutch chip equipment giant ASML (ASML.AS) New Tab, opens new tab also climbed after reports it was nearing an agreement with Taiwan's TSMC (2330.TW) New Tab, opens new tab on providing it with its most advanced machines later this year. Aided by ECB rate cut optimism, European stocks (.STOXX) New Tab, opens new tab gained almost 1% on Thursday - with its tech sector (.SX8P) New Tab, opens new tab up 2% to its highest since December 2000 and German software leader SAP (SAPG.DE) New Tab, opens new tab up 4.5%. In a well-flagged move, the ECB is expected to cut borrowing costs by 25 basis points from 4% and President Christine Lagarde's remarks on the trajectory from here will now be in focus. Money markets are pricing in 64 bps of cuts this year - suggesting possibly two more after today. With European Parliament elections kicking off in the background, European government bond yields were steady ahead of the ECB decision. Stocks were higher across Asia too, with Taiwan (.TWII) New Tab, opens new tab outperforming with gains of almost 2% on the tech buzz and mainland China underperforming yet again in the red. Key diary items that may provide direction to U.S. markets later on Thursday: * European Central Bank policy decision, press briefing * US May Challenger layoffs data, weekly jobless claims, April international trade balance; Canada April trade * US Treasury Secretary Janet Yellen gives keynote remarks at Financial Stability Oversight Council in Washington * US Treasury sells 4-week bills * US corporate earnings: JM Smucker * European Parliament elections kick off Sign up here. https://www.reuters.com/markets/us/global-markets-view-usa-2024-06-06/

2024-06-06 10:02

ISTANBUL, June 6 (Reuters) - The Turkish Competition Board said on Thursday it had launched an investigation into contracts made by Apple (AAPL.O) New Tab, opens new tab with application developers and its refusal to allow alternative payment systems on the App Store. The investigation was launched as part of a review of mobile smart devices and software for these devices, the Competition Board said in a statement. Sign up here. https://www.reuters.com/technology/turkey-launches-probe-into-apple-limitations-over-payment-systems-2024-06-06/

2024-06-06 09:57

LONDON, June 6 (Reuters) - The Bank of England allotted a record 19.096 billion pounds ($24.40 billion) in its weekly short-term repo operation on Thursday, up from 17.186 billion pounds the week before. The sums allotted by the BoE have been steadily rising to hit successive records in recent weeks. The BoE uses the repos - where banks temporarily receive central bank cash for less liquid assets such as government bonds - to keep overnight money market rates near its target as it unwinds some of its quantitative easing bond purchases. ($1 = 0.7825 pounds) Sign up here. https://www.reuters.com/world/uk/bank-england-allots-record-19-bln-stg-weekly-repo-2024-06-06/

2024-06-06 09:16

LONDON, June 6 (Reuters) - British businesses' expectations for wage growth over the coming year fell sharply last month, according to a Bank of England survey which may ease policymakers' worries that it will be hard to keep inflation on target. Expectations for wage growth over the coming year in the BoE's Decision Maker Panel survey dropped to 4.1% in May from 4.6% in April, while on a three-month average basis, the measure fell to 4.5% from 4.8%. Both figures were the lowest since the current series started in May 2022. Average earnings excluding bonuses rose by an annual 6% in the first quarter of 2024 - much higher than the rate of around 3% which most BoE policymakers view as consistent with their 2% consumer price inflation target. Last month, the BoE forecast annual wage growth would only drop to around 5.25% by the end of this year. Several policymakers have said they want to see clear signs that both wage growth and service price inflation are falling before they begin to cut interest rates, which are at a 16-year high of 5.25%. Financial markets do not fully price in a first rate cut until November - much later than many economists thought just a few weeks ago - partly reflecting persistent inflation in the United States as well as in Britain. The BoE survey showed that businesses expected inflation in one year's time to be 2.9%, unchanged from April's year-ahead expectation and above the current 2.3% rate. The central bank forecasts inflation will rise towards the end of the year as the impact of recent falls in regulated household energy prices fades. The BoE survey was based on responses from 2,317 firms between May 10 and May 24. Sign up here. https://www.reuters.com/markets/europe/uk-firms-wage-growth-expectations-fall-sharply-boe-survey-shows-2024-06-06/

2024-06-06 08:24

June 6 (Reuters) - Emerging Asian equity markets faced a second month of foreign outflows in May as robust U.S. economic data fuelled skepticism over Federal Reserve rate cuts. Data from stock exchanges in India, Indonesia, Vietnam, Thailand, South Korea, the Philippines, and Taiwan revealed that overseas investors withdrew a net $3.58 billion out of regional equities last month, following a $4.92 billion worth of net selling in April. Last month, improved U.S. consumer confidence and a positive labour market outlook led investors to scale back expectations for U.S. rate cuts. Furthermore, minutes from the Fed's latest policy meeting indicated that policymakers expect inflation to take longer than previously thought to reach the central bank's 2% target. Indian equities experienced a significant foreign outflow of $3.06 billion last month, the largest monthly exodus since January, prompted by uncertainty over the results of the country's general elections. On Tuesday, the NSE Nifty 50 and S&P BSE Sensex both plunged roughly 6%, marking their sharpest decline in more than four years, as election results indicated a slim majority for Prime Minister Narendra Modi's alliance. The shares have since rebounded as investors look forward to the formation of a new government under Modi. Kunal Vora, head of India equity research at BNP Paribas, said some foreign investors might choose to reduce their overweight positions and allocate some capital to the other EMs like China until the dust settles on government formation and allocation of key ministries. "Foreign investors could use any potential consolidation as an opportunity to buy in. However, this time they might be more tilted towards large cap and defensive names," Prerna Garg, equity strategy associate at HSBC said. "As the dust settles and the budget in early July gives more clarity on the policy front, we think investors would feel more comfortable in returning to their favourite growth story." Meanwhile, equity markets in Indonesia, Vietnam, South Korea, Thailand, and the Philippines recorded net foreign outflows of $881 million, $747 million, $679 million, $451 million, and $174 million, respectively. Bucking the trend, Taiwanese equities secured a net $2.41 billion in overseas capital after $4.61 billion of net selling in the previous month. "We believe the Taiwan market continued to benefit from the optimism of the AI development given its unique position in the semiconductor supply chain," Jason Lui, head of APAC equity and derivative strategy at BNP Paribas said. Sign up here. https://www.reuters.com/markets/asia/asian-stocks-see-foreign-outflows-may-india-leads-net-selling-2024-06-06/

2024-06-06 07:54

NAPERVILLE, Illinois, June 5 (Reuters) - After challenging their yearly high a month ago, November soybean futures on the Chicago Board of Trade declined on Wednesday for a seventh consecutive session, a run that started just after large speculators raced out of shorts to a near-flat position. June is the most common month for new-crop November beans to ink yearly highs, though the month can often feature sharp sell-offs. However, the current selling streak has come a little sooner than those in recent years despite U.S. farmers still needing to sow 20% of their soybean crop. The last time new-crop soybean futures fell for seven or more consecutive sessions within the year of expiry was in March 2023, and that 13-session streak was the longest in at least 50 years. The time before that was a nine-session downturn during January 2020. Seven-day losses through Wednesday totaled 5.7% with November soybeans settling at $11.50-1/2 per bushel, their lowest settle since April 18 and the date’s lowest in four years. New-crop beans in late May had traded above the 2023 levels. Maximum seven-session declines for November soybeans last year were around 7% and had occurred multiple times, and large money managers heading into June were nearly flat CBOT soybeans after a three-year streak in bullish territory. But money managers held a record net short in early March 2024 before staging a record round of short covering in early May on Brazilian crop fears. As of May 28, money managers’ net short of 14,218 CBOT soybean futures and options contracts was the lightest since the start of the year. Another theme separating this year from the past three is the relatively low premium of old-crop beans versus new-crop, indicating the immediate need for supplies is less urgent than in recent years. Nearby July beans are trading around 27 cents per bushel above November beans. That spread briefly turned negative in April, the first such instance since 2020, though the July-November inverse had been between $1.50 and $1.90 to start the last three Junes. Early June 2019 featured the largest carry, close to 30 cents per bushel. U.S. soybean planting pace has been ahead of the five-year average pace and losses in Brazil due to hot and dry conditions in the north and flooding in the south have been less severe than feared. Additionally, Brazilian shortfalls have not translated into U.S. soybean export demand, which relative to expectations is the worst in 23 years ahead of the upcoming 2024-25 season. The U.S. Department of Agriculture’s first health assessment of U.S. soybeans is expected on Monday. Initial U.S. corn conditions came in well above expectations this week at 75% good-to-excellent, though soybean conditions normally start a little lower than those for corn, averaging 68% over the last decade. If November soybeans do not top Jan. 2’s high of $12.37 per bushel, it will be the first time since 1999 that new-crop soybeans set their year-of-expiry high in January. The contract had reached $12.30-1/2 on May 7, up considerably from the year’s low of $11.22-3/4 set on Feb. 26. Hopeful soybean bulls could get support at the end of the month when USDA publishes its acreage survey. The last time the June survey turned up more U.S. soybean plantings than the trade expected was in 2014. Karen Braun is a market analyst for Reuters. Views expressed above are her own. Sign up here. https://www.reuters.com/markets/commodities/new-crop-soybeans-notch-rare-losing-streak-start-us-growing-season-2024-06-06/