Riksbank Rate Cut Expected, DAX Index Reacts

Equities

On Tuesday, the  FTSE 100 reached a record high, closing at 8,335.68 points, an increase of 1.2%. This marked the 11th rise in the past 14 sessions for the blue-chip index. Among UK companies, BP's shares dropped 1.3% after the oil giant reported first-quarter earnings that fell short of forecasts. The lower earnings were attributed to decreased energy prices and a US refinery outage, despite a rise in oil and gas production. In contrast, Shell saw its shares increase by 1.3% following reports of potential discussions with Saudi Aramco to sell its Malaysian gas station business in a deal possibly worth up to $1 billion.

In the airline sector, shares of Easyjet and Wizz Air faced significant declines, tumbling 5.8% and 7%, respectively. This followed a warning from Ryanair's CEO that ticket fares this summer might be lower than anticipated, impacting the broader airline industry negatively.

Shifting focus to the US markets, the S&P 500 ended slightly higher, up by 0.13%, closing at 5,187.70 points. Meanwhile, the Dow Jones Industrial Average also posted gains, rising by 0.08% to close at 38,884.26 points, marking its fifth consecutive session of increases—the longest streak since December 2023.

Disney experienced a significant drop, with shares plunging 9.5%. Tesla's shares also declined, falling 3.8% after reports showed a decrease in sales of China-made electric vehicles in April, down 18% from the previous year. Palantir Technologies saw a sharp 15.1% drop in its share price after its annual revenue forecast came in below analysts' expectations, marking its most substantial one-day decline since May 2022.

Megacap stocks rose 1.9% and 0.6% respectively. Nvidia's shares fell by 1.7% after news that Apple was developing its chip to run AI software in data centres, potentially challenging Nvidia's market position. However, Apple itself saw a slight increase of 0.4% as it introduced a new chip, the M4, initially deployed in an iPad Pro model.

Forex & Commodities

Wall Street trimmed its earlier gains as investors evaluated the potential timing and magnitude of Federal Reserve rate cuts, amidst a strengthening dollar which contributed to further weakening of the yen. The dollar index rose by 0.3%, with the euro declining to $1.0753. The British pound also saw a decrease, trading at $1.2508, down by 0.42% against the dollar.

Gold prices fell, with US futures closing 0.3% lower at $2,324.20 per ounce, as market participants focused on the likelihood of Federal Reserve rate reductions. This sentiment was influenced by a weaker-than-expected US jobs report and slower GDP growth, which have led investors to anticipate a more dovish approach from the Fed. Market expectations now suggest 44 basis points of rate cuts by the end of 2024, potentially starting in September.

Oil prices also experienced a slight decline, with US crude settling down 0.13% at $78.38 per barrel and Brent crude settling at $83.16 per barrel. This movement reflects easing supply concerns and cautious expectations ahead of an upcoming OPEC+ policy meeting.

Treasury yields saw a slight dip as traders prepared for the issuance of $125 billion in new bonds, while keeping an eye on forthcoming remarks from Federal Reserve officials regarding the outlook for 2024 monetary policy. The yield on the benchmark 10-year note fell 3 basis points to 4.459%.