2 FED cuts predicted till end of year, Stocks in EU & Asia climb
Index gains: Nasdaq hits record high, MSCI All-Country up 8% YTD, S&P 500 near peak. April PPI up 0.5%, CPI expected to ease.
Market Index Performance
The Nasdaq Composite Index reached a record high on Tuesday, influenced by a late rally on Wall Street. This uptrend extended to global markets, with the MSCI All-Country World Index up over 8% for the year, close to the S&P 500’s 10% gain. The S&P 500 is less than 0.3% away from its historical peak of 5264.85. Investor sentiment was buoyed by bullish fund manager surveys and a positive outlook from the Federal Reserve.
Economic Index Indicators
The Producer Price Index (PPI) for April recorded a 0.5% increase, exceeding forecasts. The upcoming Consumer Price Index (CPI) release is anticipated to show a moderation in inflation, with monthly core CPI expected to ease to 0.3% from 0.4%, and annual core inflation projected to fall to 3.6% from 3.8%. April retail sales data, crucial for assessing Q2 growth estimates, is also due for release. The dollar slipped to a one-month low versus the euro, reflecting a dovish outlook on interest rates.
Federal Reserve Commentary
Fed Chair Jerome Powell, speaking in Amsterdam, expressed optimism that inflation will decline but acknowledged that his confidence has waned due to persistent price increases earlier in the year. Futures markets are pricing in nearly two Fed rate cuts by the end of the year, with 10-year Treasury yields dropping to their lowest in over a month at 4.42%.
Company News
Raiffeisen Bank’s shares fell 2% after the U.S. Treasury warned it might restrict its access to the U.S. financial system due to dealings in sanctioned Russia.
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Europe Index Performance
Stock Market Performance
The STOXX 600 index reached new highs, mirroring gains in the U.S. markets. Britain’s FTSE 100 rose 0.5% to a record 8,747.41, Germany’s DAX increased by 0.2% to 18,755.96, and France’s CAC 40 edged up 0.1% to 8,229.78.
Economic Outlook
Despite expectations for an ECB rate cut in June, Europe’s benchmark index hit a record, led by gains in mining, industrial goods, and real estate stocks. The euro remained stable against the dollar, with the Bloomberg Dollar Spot Index falling 0.1%.
Asia Index Performance
Stock Market Performance
Tokyo’s Nikkei 225 climbed 0.1% to 38,385.73, and Australia’s S&P/ASX 200 advanced 0.4% to 7,753.70. The Shanghai Composite Index fell 0.8% to 3,119.90 after the central bank maintained a steady lending rate, indicating a focus on monetary stability. Taiwan’s Taiex gained 0.8%, while Bangkok’s SET lost 0.6%. Markets in South Korea and Hong Kong were closed for holidays.
Commodities and Currencies
Oil and Commodities
U.S. crude oil prices rose 0.1% to $78.11 a barrel, while Brent crude increased 0.4% to $82.76. The International Energy Agency revised its 2024 demand growth forecast down by 140,000 barrels per day. Copper futures in New York reached a record high due to a supply squeeze, and gold prices climbed nearly 1% on Tuesday, continuing to rise.
Cryptocurrencies
Bitcoin rose 2.2% to $62,954.55, and Ether increased by 1% to $2,921.06, reflecting continued investor interest in digital assets.
Currencies Index Performance
The U.S. dollar weakened, with the Japanese yen rising 0.4% to 155.84 per dollar and the euro stable at $1.0827. The British pound increased by 0.2% to $1.2615.
Bonds and Interest Rates
Bond Market
The yield on 10-year Treasuries declined to 4.42%, while Germany’s 10-year yield fell to 2.47%, and Britain’s 10-year yield dropped to 4.11%. These movements reflect a market expectation of slowing inflation and potential rate cuts by major central banks.
Key Economic Events
Upcoming key data releases include U.S. CPI, retail sales, business inventories, and the New York Empire State Manufacturing Index. Several Federal Reserve officials are scheduled to speak, which could provide further insights into the central bank’s policy outlook.
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