Rate cuts likely in Canada, UK and the EU, Japan real wages down
Market in the U.S. up amid Fed rate cut hopes; job openings fall to a 3-year low. HP Enterprise, Crowdstrike, and Stitch Fix surge pre-trading.
United States Market
Investor concerns about a slowing U.S. economy are being countered by hopes for interest rate cuts, driving Wall Street stocks to close higher for three consecutive days despite early losses. This optimism is bolstered by signs of a cooling labor force, with U.S. job openings in April falling to their lowest in over three years. The ratio of vacancies to job-seekers has also returned to mid-2021 levels.
The upcoming May employment report is highly anticipated, with ADP’s private sector job survey predicting a modest slowdown to 175,000 jobs. Futures markets reflect a 45-basis point reduction in 2024 Fed easing, with a nearly 80% chance of a pre-election rate cut by September.
U.S. Treasury yields have dropped, partially due to a significant decline in energy prices, with crude oil returning to February levels. Ahead of major job data releases, the market’s focus remains on potential rate cuts.
In corporate news, Hewlett Packard Enterprise surged 13.9% in premarket trading after exceeding Wall Street forecasts and raising its profit guidance. Cybersecurity firm Crowdstrike’s shares rose 8.8% following strong sales and profit reports. Stitch Fix also saw a 17% premarket jump due to better-than-expected third-quarter sales. Conversely, Dollar Tree’s early gains reversed, leading to a 2.6% premarket drop.
ADP reported that private employers added 152,000 jobs in May, falling short of expectations and indicating a “steep decline” in manufacturing jobs. This data precedes the comprehensive government jobs report, which has significant implications for the Fed’s rate decisions.
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Canadian Market
The Bank of Canada is poised to cut interest rates, with an 80% chance of a quarter-point reduction anticipated. Inflation has returned to the BoC’s 1-3% target range, and early-year growth has been disappointing. The Canadian dollar remained steady ahead of this decision.
Europe
Monetary easing is also expected from the European Central Bank, which could join the Fed, BoC, and other central banks in cutting rates. This trend in global monetary policy has minimized the impact on the U.S. dollar, which remains stable.
Asia
Japan’s inflation-adjusted real wages fell 0.7% in April year-on-year, marking the 25th consecutive monthly decline. Despite this, the pace of decline has slowed, and the Bank of Japan continues to monitor closely. Japanese and Chinese stock markets experienced declines on Wednesday, with China’s market hit by poor performance in consumer and property shares, despite an unexpected rise in service activity in May.
Indian stocks rebounded, with the Nifty 50 Index climbing over 2% after key allies supported Prime Minister Narendra Modi’s government formation following a narrow election victory.
Market Performance
U.S. Markets:
- S&P 500 futures rose 0.3%
- Nasdaq 100 futures increased 0.6%
- Dow Jones Industrial Average futures went up 0.2%
European Markets:
- Stoxx Europe 600 gained 0.8%
Asian Markets:
- Mixed performance with Japan and China lagging, while India outperformed.
Currencies:
- Dollar index was stable
- Euro slightly down by 0.1% to $1.0863
- British pound unchanged at $1.2774
- Japanese yen fell 0.8% to 156.17 per dollar
Cryptocurrencies:
- Bitcoin rose 0.7% to $70,903.76
- Ether fell 0.2% to $3,800.45
Bonds:
- 10-year U.S. Treasury yield rose to 4.34%
- Germany’s 10-year yield stable at 2.53%
- Britain’s 10-year yield increased to 4.20%
Commodities:
- WTI crude rose 0.4% to $73.56 per barrel
- Spot gold increased 0.3% to $2,334.52 an ounce
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