Spreadex Market Update
US Markets Defy Global Trend After Soft China GDP
US stocks surge to new highs despite downward pressure in global markets following China's GDP data.
The financial markets continue to showcase their resilience as US stocks defy the global trend, reaching new highs despite the pressure faced by European and Asian equities. Improved risk appetite contributes to this upward momentum, with Treasury yields weakening and the dollar feeling the impact. Meanwhile, crude oil prices continue their decline, despite efforts by Saudi Arabia to extend production cuts.
Key factors for today
- US stocks break the trend and reach new highs while global markets struggle
- Improved risk appetite weakens Treasury yields, weighing on the dollar
- Crude prices continue to decline despite production cuts
- RBA minutes reveal uncertainty over interest rates, while ECB hawks anticipate rate hikes
Market movers
- NY Empire State Manufacturing Index beats expectations, contributing to a resilient US economy
- US Treasury Secretary Janet Yellen expects no recession this year
- Saudi Arabia extends production cuts, but crude prices still decline
- RBA minutes reflect uncertainty over interest rates
- ECB hawks anticipate rate hikes
The big news
US Indices Reach New Highs, Yellen Expects No Recession
US stocks defied the downward pressure seen in European and Asian equities, pushing above a one-year high. This rise in US stocks was accompanied by weaker Treasury yields, indicating an improved risk appetite but weighing on the dollar. The NY Empire State Manufacturing Index beating expectations added to the narrative of a resilient US economy, while Janet Yellen's reassurance that she does not expect a recession this year further bolstered investor confidence. Nasdaq, in particular, showed strong performance, aiming to surpass the milestone of 16,000.
Crude Prices Lower Despite More Production Cuts
Despite Saudi Arabia's announcement of extending production cuts, crude oil prices continued their decline. The Kingdom reported a decrease in May's production, and the US Energy Information Administration (EIA) predicted a decline in US shale production for August. These efforts to stabilize prices were not enough to counter the prevailing bearish sentiment. West Texas Intermediate (WTI) crude oil prices experienced a loss by the end of the day, although they briefly rose to $76 per barrel intraday.
RBA Minutes Show Uncertainty
The minutes from the latest RBA decision revealed uncertainty over interest rates. Although the minutes aligned with expectations of a restrictive policy stance, there was a stronger case for keeping rates unchanged despite discussions of a potential hike. Australian Treasurer Jim Chalmers expects inflation to moderate in the upcoming reading, impacting the Australian dollar's performance. However, following the release of the minutes, the Aussie dollar was seen trading higher, indicating a market response to the information.
ECB Hawks See More Rate Hikes
ECB officials Joachim Nagel, Bostjan Vasle, and Ignazio Visco expressed hawkish views on future rate hikes. Nagel expected a rate hike in July and Vasle emphasized that inflation has been high for too long. Visco addressed underlying inflation, expressing optimism about its potential decline but refraining from commenting on future rate hikes. These statements reflect a cautious yet optimistic outlook from ECB hawks regarding the European economy.
Economic Calendar:
- Canadian Inflation
- US Retail Sales
- Industrial Production
- NAHB Housing Market Index
- Fed Barr Speech
- API Crude Oil Stock Change
Quote of the Day:
"Markets can remain irrational longer than you can remain solvent." - John Maynard Keynes
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