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Market shows appetite for tech, inflation appears more manageable

EU markets still struggle, Oil slightly down

Nvidia’s market valuation hits $3.3T. UK inflation to drop to 2% in May, BoE holds rates. US Fed reduces rate cut forecast.

UK Market Data

UK headline inflation for May is anticipated to return to the Bank of England’s (BoE) 2% target, down from April’s 2.3%, largely due to easing household energy bills. Despite this, the BoE is expected to maintain current interest rates, focusing instead on wage growth and service sector inflation, which is estimated at 5.5% for May. Recent data indicates a faster-than-expected increase in British wages, suggesting the BoE might keep rates higher for longer to combat inflation pressures. The FTSE 100 has declined 3% since reaching a record high in May, partly due to these economic uncertainties.

US Market Trends

U.S. markets were closed for Juneteenth, but mild inflation readings last week led to a shift in Federal Reserve policy expectations. Initially, three quarter-point rate cuts were projected for the year, but this has been reduced to one. Current data shows retail sales rising by 0.1% in May, below expectations, and April sales revised to a 0.2% decline, indicating possible consumer fatigue. Consequently, rate cut expectations for September have increased slightly, with traders now predicting 48 basis points of easing for 2024, down from an earlier projection of 160 basis points.

Nvidia’s market value surged to $3.335 trillion, making it the world’s most valuable company, surpassing Microsoft. The rise in tech stocks has buoyed Asian markets, with Taiwan stocks hitting new records and South Korean stocks reaching their highest since January 2022.

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European Market Dynamics

European equity markets opened lower. The FTSE 100 dropped 0.2% to 8,177.86, Germany’s DAX decreased by 0.1% to 18,109.65, and the CAC 40 in Paris declined 0.2% to 7,615.76. UK inflation data aligning with BoE’s target of 2% and service sector price pressures suggest rates will stay at 5.25%. Meanwhile, the Stoxx 600 in Europe slipped 0.1%, although basic resources and travel sectors saw gains.

Asian Market Performance

Japan’s Nikkei 225 index rose 0.2% to 38,570.76, buoyed by trade data showing a 13.5% increase in exports and a 9.5% rise in imports year-over-year, influenced by higher prices and a weaker yen. The Bank of Japan’s minutes revealed discussions on the yen’s weakness possibly driving higher inflation, with potential interest rate increases hinted by Governor Kazuo Ueda.

Hong Kong’s Hang Seng index jumped 2.9% to 18,430.39, while the Shanghai Composite fell 0.4% to 3,018.05 after China’s securities watchdog announced stricter financial oversight. Sydney’s S&P/ASX 200 inched down 0.1% to 7,769.70, South Korea’s Kospi surged 1.2% to 2,797.33, Taiwan’s Taiex gained 2%, and Bangkok’s SET fell 1%.

Global Stock Movements

World stocks presented mixed outcomes on Wednesday, with U.S. benchmarks hitting new records amidst signs of economic slowing without recession. Futures for the Dow Jones Industrial Average fell 0.1%, while the S&P 500 rose 0.1%. European bond yields rose, with UK 10-year yields up three basis points. Despite political tensions in France and potential delays in Federal Reserve rate cuts until December, global markets remained focused on economic resilience and technology sector growth.

Commodity and Currency Markets

Brent crude dropped 17 cents to $85.16 per barrel, and U.S. benchmark crude oil fell 15 cents to $80.56 per barrel. The dollar slightly weakened against the yen, dropping to 157.76 yen, and the euro dipped to $1.0736. European yields climbed, with Germany’s 10-year yield up two basis points to 2.42%, and Britain’s 10-year yield increased three basis points to 4.08%.

Cryptocurrency and Bond Yields

Bitcoin rose 0.8% to $65,379.38, and Ether climbed 2.6% to $3,548.41. The yield on 10-year U.S. Treasuries remained steady at 4.22%. These moves underscore a broader trend of cautious optimism in financial markets amidst mixed economic signals.

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