Market Update
China Stocks Extend Weekly Selloff Amid Earnings Growth and Property Market Worries
Li Chen
30 May, 2024
Hong Kong
Stocks in Shanghai and Hong Kong remained under pressure for the third consecutive day due to lingering property market woes and a lack of effective policy responses.
Market jitters were compounded after hawkish comments from U.S. policymakers raised the prospect of interest rates staying higher for longer and a possible rate cut that may not materialize in 2024.
The yield on 10-year U.S. Treasury bonds rose above 4.5%, a troublesome level for the stock market, as rising bond yields attract more fund flows away from the riskier stock markets.
The rise in U.S. bond yields dragged down market indexes in Tokyo and Seoul by 1% and in Mumbai and Sydney by 0.5%.
Benchmark indexes in Hong Kong trimmed the five-week market gains to less than 12% from 20% after policymakers' drive to lift the embattled property market showed little progress.
Shanghai and Guangzhou were the latest tier-one cities to relax curbs on buying properties and support loosened mortgage standards, but the lack of confidence in property developers kept buyers away.
Moreover, job market uncertainty and elevated home prices have also dampened interest from first-time home buyers.
On the economic front, investors are looking forward to the release of China's survey of the manufacturing industry, and most economists are anticipating the sector to expand for the third month in a row.
The manufacturing sector's health is closely watched by policymakers because the sector is one of the largest contributors to economic growth and critical for creating new jobs.
China Stock Movers
Market indexes in Shanghai and Hong Kong extended weekly losses to over 2.5% amid persistent worries about earnings growth and property market woes.
The CSI 300 index decreased 0.5% to 3,594.81, and the Hang Seng index dropped 1.5% to 18,208.58.
Longfor Group declined 3.9% to HK$12.68, China Resources Land dropped 3% to HK$29.15, and China Vanke fell 5.4% to HK$5.47.
Electric vehicle markers generally traded down on the worry that additional U.S. sanctions imposed on Russia may negatively impact the export of automobiles.
BYD rose 1.4% to HK$220.60, Li Auto dropped 2.7% to HK$77.75, and Xpeng declined 1.7% to HK$31.85.
Banks traded down amid market volatility and speculation that the People's Bank of China may be forced to lower its 5-year loan prime rate amid property market woes and economic growth weakness.
Bank of China dropped 2.2% to HK$3.70, ICBC declined 1.7% to HK$4.47, and China Construction Bank fell 2.1% to HK$5.57.
Zijin Mining Group declined 5.7% to HK$17.02 after volatile gold and silver prices declined on the speculation that U.S. interest rates are likely to stay higher, supporting a higher dollar in international currency trading.
India Movers: Awfis Space, Capacite Solutions, GMR Airports, MTNL, R R Kabel, SJVN
Arun Goswami
30 May, 2024
Mumbai
Stocks and benchmark indexes in Mumbai headed lower amid weak market sentiment after hawkish comments from U.S. policymakers' sparked a selloff in global bonds.
The Sensex index decreased by 0.5% to 74,133.96, and the Nifty index fell by 0.5% to 22,592.30.
On the Mumbai stock exchange, 62 stocks traded at their 52-week highs, and 34 stocks traded at their 52-week lows.
The yield on the 10-year Indian government bonds inched higher to 7.01%, and the Indian rupee edged lower at ₹83.40 against the U.S. dollar.
R R Kabel Ltd. rose 1.9% to ₹1,757.0 after the U.S.-based private equity group, TPG Asia, is likely to divest its entire 5% stake, or 56 lakh shares, for about ₹1,000 crore.
Awfis Space Solutions is set to list its stock for ₹383 per share on May 30 and raise ₹599 crore through the sale of 1.56 crore shares.
The flexible space company operates 169 coworking space centers in 16 cities in India with 105,258 seats and plans to add 31 centers with 25,312 seats.
Capacite Infraprojects rose 3.7% to ₹316.0, and the company's board plans to meet on June 3 to discuss its options to raise 100 crore through the sale of convertible bonds through private placement.
SJVN Ltd. decreased 3.7% to ₹134.70 after the power company reported a sharp jump in profit, but revenue declined in the March quarter.
Revenue decreased by 4.1% to ₹482.9 crore from ₹503.8 crore, and net income soared 255% to ₹61.1 crore from ₹17.2 crore a year ago, respectively.
GMR Airports declined 1.8% to ₹85.70, and the airport facilities operator reported a narrower loss in the March quarter.
Revenue rose 29.5% to ₹2,446.8 crore from ₹1,889.7 crore, and net loss narrowed to ₹167.6 crore from ₹638.9 crore a year ago.
MTNL decreased 1.6% to ₹37.40, and the telecom operator reported a wider loss in the March quarter.
Revenue fell 4.1% to ₹482.9 crore from ₹503.8 crore, and net loss widened to ₹783.7 crore from ₹748.6 crore a year ago, respectively.
Stocks On Wall Street Struggle Amid Lack of Catalysts, Global Markets Swing Lower
Alexander Garcia
29 May, 2024
Miami
Stocks and benchmark indexes slipped on Wednesday, and the yield on U.S. Treasury notes advanced for the second day in a row.
The S&P 500 index and the Nasdaq Composite edged down 0.5%, and megacap technology stocks struggled near recent levels.
Nvidia attempted to extend gains after rising more than 20% in three previous sessions following the company's earnings report last week, which exceeded the most optimistic outlook.
Investors are betting that the company at the center of the artificial intelligence technology wave is likely to continue to deliver earnings growth that is ahead of market expectations as the large data center operators ramp up the purchase of servers with advanced chips.
In addition, the company's release of new products in the third quarter are likely to kick sales in a higher gear.
Most investors are anticipating Nvidia to deliver at least $23 per share in earnings in the fiscal year ending in January 2025, and the AI chipmaker's earnings in the next fiscal year could range between $30 and $36 per share.
Abercrombie & Fitch also delivered stellar results in its latest quarter, driving the stock higher by 20%, after sales and earnings surpassed analysts' expectations.
The bond market sold off after the Treasury Department auction for 2-year and 5-year notes fell short of market expectations, driving the yield on 10-year Treasury notes above the critical level of 4.5%.
U.S. Indexes and Treasury Yields
The S&P 500 index fell 0.7% to 5,286.19, and the Nasdaq Composite dropped 0.9% to 16,731.52.
The yield on 2-year Treasury notes edged higher to 4.97%, 10-year Treasury notes increased to 4.57%, and 30-year Treasury bonds edged lower to 4.59%.
WTI crude oil increased $0.09 to $80.37 a barrel, and natural gas prices eased 6 cents to $2.77 a thermal unit.
Gold decreased by $16.75 to $2,343.14 an ounce, and silver fell 9 cents to $31.96.
The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.73.
U.S. Stock Movers
Chewy jumped 6.5% to 18.0 after the online pet food store reported better-than-expected quarterly results.
Marathon Oil jumped 8.3% to $28.64 after the company agreed to be acquired by ConocoPhillips for $17.1 billion and assume $5.4 billion in debt.
Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.
The deal is expected to be immediately attractive to ConocoPhillips shareholders.
After the transaction, the third-largest U.S. oil company plans to increase its dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first full year, at recent commodity prices.
The oil industry has experienced a wave of transactions in recent months. Exxon Mobil agreed to acquire Pioneer Natural Resources for $60 billion, and Hess' shareholders approved the merger of the company with Chevron.
European Stocks Face Selling Pressure After Bond Yields Advance
The sharp selloff in the bond market weighed on stock market indexes, and the euro held its ground.
Bonds in the Euro Area sold off after the U.S. Treasury auction of 2-year and 5-year notes was weaker than anticipated.
The U.S. Treasury yields jumped following the unexpected weakness in the auction and sparked a selloff in worldwide bonds.
The yield on the 10-year German Bund increased to a 6-month high, the French bond yield advanced to a one-month high, and the UK 10-year government bond yield jumped to a three-week high.
Investors also pared back rate-cut expectations amid slow progress on disinflation and hawkish comments from policymakers in the U.S. and Europe.
Germany's consumer price inflation inched up to 2.4% from 2,2% in the previous two consecutive months, the Federal Statistical Office, Destatis, reported Wednesday.
Inflation rose for the first time in five months, after food and services prices accelerated in the month, offset by the decline in goods and energy prices.
Core inflation, which excludes food and energy prices, held steady at 2.0%
Spain's Retail Sales Growth Slowed In April
Spain's retail sales increase slowed for the third month in a row, according to the data released by the statistical agency INE.
Retail sales in April rose 0.3% from a year ago, after an upwardly revised 0.9% increase in the previous month.
Retail sales rose at the slowest pace since November 2022, after spending on food and non-food items rose at a significantly slower pace.
On a monthly basis, Spain's retail sales rose 0.8%, reversing a 0.4% fall in the previous month.
In the first four months to April 2024, retail sales rose from a year ago by 0.9%.
Europe Indexes and Yields
Benchmark indexes in London, Paris, and Frankfurt traded down, and crude oil prices advanced amid rising tensions in the Middle East but eased in the afternoon trading.
The DAX index decreased by 1.1% to 18,473.29; the CAC-40 index fell by 1.5% to 7,935.03; and the FTSE 100 index decreased by 0.9% to 8,183.07.
The yield on 10-year German bonds edged up to 2.62%; French bonds inched higher to 3.11%; the UK gilts edged lower to 4.35%; and Italian bonds inched higher to 3.93%.
The euro edged higher to $1.084; the British pound inched higher to $1.274; and the U.S. dollar gained to 91.34 Swiss cents.
The euro approached a record high against the Japanese yen on the speculation that the European Central Bank is likely to take a slower approach to lowering its interest rate compared to the U.S. Federal Reserve.
The yen fell to this month's low of 170.44 and approached a record low of 171.56 against the euro.
Brent crude decreased $1.10 to $83.52 a barrel, and the Dutch TTF natural gas fell by €0.32 to €33.84 per MWh.
Europe Stock Movers
International Distributions Services advanced 4% to 334.0 after the parent company of Royal Mail accepted a £3.57 billion takeover proposal from EP Group, controlled by Czech billionaire Daniel Kretinsky.
BHP Group gained 2.1% to 2,384.0 pence after the mining company dropped its £39 billion takeover offer for Anglo American.
Oil explorers and refiners extended gains for the second day in a row amid rising tensions in the Middle East, and traders hoped that the OPEC member nations would extend production cuts at the next meeting this Sunday.
BP plc gained 1.6% to 493.60 pence, Shell PLC jumped 1.7% to 2,827.0, and TotalEnergies SE gained 0.4% to €66.43.
The Rise In Global Bond Yields Weighs On Japanese Stocks and Yen
Weak yen and global interest rate worries weighed on market sentiment in Tokyo ahead of the release of the inflation update.
The Nikkei and the Topix fell as much as 1%, and the yield on Japanese government bonds inched higher than 1% to a 12-year high after hawkish comments from non-voting members of the Federal Reserve's policymaker.
Market sentiment in Tokyo was also on the defensive after the U.S. Treasury yields unexpectedly rose following the weaker-than-expected auction of 2-year and 5-year Treasury notes.
The widening yield gap between the U.S. and Japan dragged the Japanese yen lower, and the currency traded at 157.86 against the U.S. dollar in late afternoon trading in Tokyo.
Investors are also looking ahead to the release of the Tokyo area's inflation data for April, and the city's inflation is generally seen as a bellwether of the nationwide price trends.
Japan Stock Movers
The Nikkei 225 stock average dropped 0.8% to 38,556.87, and the Topix index declined 1% to 2,741.62.
Stocks in Tokyo traded down on the ongoing monetary policy uncertainty and the weakness in the yen.
Mitsubishi UFJ rose 0.6% to ¥1,637.0 and traded at an 18-year high on the expectations of the company benefiting from the weaker yen and rising bond yields.
Last week, Mitsubishi UFJ reported a record profit of 1.5 trillion yen in the financial year 2024 and announced a stock repurchase program of 50 billion yen.
The company also announced the CET1 ratio, a measure of risk capital, to range between 9.5% and 10.5%, and a dividend payout ratio of around 40%.
Utilities and heavy industry-linked stocks were among the leading decliners.
Tokyo Electric Power dropped 8.3% to ¥926.30, Mitsubishi Heavy Industries declined 3.6% to ¥1,308.0, and Teijin Ltd. fell 5.5% to ¥1,519.0.
Diversified exporters and financial services were among the leading gainers.
Sompo Holding, the diversified insurance group, rose 4.2% to ¥3,306.0; Hoya Corp., the maker of optical products for the semiconductor industry, gained ¥18,635.0; and Konami Group, the video game publisher, gained 3.3% to ¥10,905.0.
China Indexes Extend Losses, Yuan Weakens to a 6-month Low
Market indexes headed lower and extended recent losses as investors assessed the impact of policymakers' plans to revive property market transactions and stabilize economic growth.
Shenzhen and Guangzhou joined other top-tier cities to ease restrictions on home purchases, following efforts by the politburo and the People's Bank of China to encourage more activities in the sector.
Investors are increasingly worried that policymakers' focus on encouraging real estate purchases may fall flat amid a lack of consumer confidence, a lack of credibility among real estate developers, and elevated home prices.
Despite the added incentives to buy real estate, most families are parking their money in bank savings or purchasing precious metals, avoiding the purchase of new and unfinished houses.
Investors are also looking ahead to the release of purchasing managers' index data on Friday, and expectations are high that the manufacturing sector will remain in expansion.
China's top leadership has emphasized advanced manufacturing as one of the key drivers of economic growth, and exports of electric vehicles, renewable energy, and advanced electronics are expected to contribute to job market expansion.
The Chinese yuan drifted to a six-month low of 7.2658 against the U.S. dollar ahead of the release of the manufacturing sector update on Friday.
The People's Bank of China also set the exchange rate near the bottom of its trading range to facilitate exports and stem the growing tide of capital outflow.
Currency traders are bracing for more devaluation of the yuan amid persistent weakness in the Japanese yen, pressuring already narrow margins for exported goods.
China Stock Movers
The CSI 300 index increased 0.1% to 3,614.27, and the Hang Seng index dropped 1.8% to 18,491.92.
Property developers traded with a downward bias on the worry that the recent measures announced by the government are likely to fall short in reviving the fortunes of companies.
China Resources Land decreased 1.6% to HK$30.0, China Vanke declined 3% to $5.70, and Longfor Group fell 1% to HK$13.24.
Property developer stocks have rebounded about 30% in the last three weeks of trading, but stocks in the sector are still down more than 70% from the peak in April 2021.
Lenovo Group declined 1.9% to HK$11.60 after the personal computer maker signed a deal with Saudi Arabia's sovereign wealth fund to sell $2 billion of convertible bonds.
Stock declined on the worry that a higher share count would dilute earnings per share.
BYD soared 5.3% to HK$217.60 after the electric vehicle maker announced an upgrade that could extend the driving range of its hybrid electric vehicle.
U.S. Movers: American Airlines, Abercrombie & Fitch, Cava, Chewy, ConocoPhillips, Dicks' Sporting Goods
Scott Peters
29 May, 2024
New York City
Chewy jumped 6.5% to 18.0 after the online pet food store reported better-than-expected fiscal first quarterly results.
Revenue in the fiscal first quarter increased to $2.9 billion from $2.8 billion, net income to $67.3 million from $22.8 million, and diluted earnings per share advanced to 15 cents from 5 cents a year ago.
Chewy also announced today that its board has authorized a share repurchase program of up to $500 million of its Class A and/or Class B common stock.
The company's active customer base in the quarter edged slightly lower to 20.0 million from 20.4 million a year ago, and net sales per active customer increased to $562 from $513 a year ago.
The company estimated net sales in the fiscal second quarter to range between $2.84 billion and $2.86 billion, an increase of between 2% and 3% from a year ago.
The company estimated fiscal year 2024 sales to range between $11.6 billion and $11.8 billion, an increase of between 4% and 6% from the previous year.
Marathon Oil jumped 8.3% to $28.64 after the company agreed to be acquired by ConocoPhillips for $22.5 billion, and assuming the company's $5.4 billion of debt.
Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.
The deal is expected to be immediately accretive to earnings to ConocoPhillips shareholders.
After the transaction, the third-largest U.S. oil company plans to increase its dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first full year, at recent commodity prices.
The oil industry has experienced a wave of transactions in recent months. Exxon Mobil agreed to acquire Pioneer Natural Resources for $60 billion, and Hess' shareholders approved the merger of the company with Chevron.
Dick's Sporting Goods jumped 10.2% to $214.75 after the specialty retailer reported better-than-expected quarterly earnings and comparable sales rose 5.3%.
Increase in customer visits, more customer transactions, and a larger average ticket size drove sales higher.
The specialty retailer said revenue in the quarter ending on May 4 rose 6% to $3.02 billion from $2.84 billion, net income fell to $275 million from $303 million, and diluted earnings per share eased to $3.30 from $3.40 a year ago.
The retailer estimated full-year earnings per share to range between $13.35 and $13.75, higher than the previous estimate between $12.85 and $13.25.
Abercrombie & Fitch soared 10.4% to $170.59 after the company reported record first-quarter sales.
Revenue in the quarter ending on May 4 rose 22.1% to $1.02 billion, driven by an Abercrombie sales increase of 31.1% to $571.1 million and Hollister sales growth of 12.3% to $449.2 million.
Net income in the quarter advanced to $113.9 million from $16.6 million, and diluted earnings per share rose to $2.14 from 32 cents a year ago, respectively.
Cava Group dropped 8.5% to $75.50 after the salad restaurant chain reported better-than-expected quarterly results.
The stock declined after the Mediterranean fast-casual restaurant chain operator reported a decline in customer traffic.
Revenue increased 30.3% to $256.3 million, driven by a 2.3% increase in same-store sales. The sales increase was also driven by a 3.5% increase in menu prices, offset by a 1.2% decrease in store traffic.
Net income swung to a profit of $14.0 million from a loss of $2.1 million, and diluted earnings per share were 12 cents compared to a loss of $1.30 a year ago.
The company estimated new store openings between 50 and 54 from the previous estimate between 48 and 52, and the same store sales growth range between 4.5% and 6.5% from the previous estimate between 3.0% and 5.0%.
American Airlines Group declined 14.5% to $11.47 after the company said in a regulatory filing that it plans to slow its capacity growth in the second half and that its Chief Commercial Officer, Vasu Raja, will depart the airline in June.
The company lowered its adjusted operating margin guidance by 1 percentage point to between 8.5% and 10.5% from the previous estimate of between 9.5% and 10.5%.
The airline also lowered its fiscal second-quarter adjusted earnings per share to between $1.0 and $1.15 from the previous estimate of between $1.15 and $1.45.
The airline said its capacity growth in the second quarter will slow to 3.5% from 8.5% in the first half of fiscal 2024.
ConocoPhillips Agreed to Acquire Marathon Oil In All-Stock $22.5 Billion Deal
Scott Peters
29 May, 2024
New York City
Marathon Oil jumped 8.3% to $28.64 after the company agreed to be acquired by ConocoPhillips for $17.1 billion and assume $5.4 billion in debt.
Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.
The deal is expected to be immediately attractive to ConocoPhillips shareholders.
After the transaction, the third-largest U.S. oil company plans to increase its dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first full year, at recent commodity prices.
The oil industry has experienced a wave of transactions in recent months. Exxon Mobil agreed to acquire Pioneer Natural Resources for $60 billion, and Hess' shareholders approved the merger of the company with Chevron.
U.S. Stocks Turn Lower as Treasury Yields Inch Higher
Barry Adams
29 May, 2024
New York City
Stocks and benchmark indexes slipped in early trading on Wednesday, and the yield on U.S. Treasury notes advanced for the second day in a row.
The S&P 500 index and the Nasdaq Composite edged down 0.2%, and megacap technology stocks struggled near recent levels.
Nvidia attempted to extend gains after rising more than 20% following the company's earnings report last week, which exceeded the most optimistic outlook.
Investors are betting that the company at the center of the artificial intelligence technology wave is likely to continue to deliver earnings growth that is ahead of market expectations as the large data center operators ramp up the purchase of servers with advanced chips.
Most investors are anticipating Nvidia to deliver at least $23 per share in earnings in the fiscal year ending in January 2025, and the AI chipmaker's earnings in the next fiscal year could range between $30 and $36 per share.
The bond market sold off after the Treasury Department auction for 2-year and 5-year notes fell short of expectations, driving the yield on 10-year Treasury notes above the critical level of 4.5%.
U.S. Indexes and Treasury Yields
The S&P 500 index fell 0.7% to 5,286.19, and the Nasdaq Composite dropped 0.9% to 16,731.52.
The yield on 2-year Treasury notes edged higher to 4.97%, 10-year Treasury notes increased to 4.57%, and 30-year Treasury bonds edged lower to 4.59%.
WTI crude oil increased $0.09 to $80.37 a barrel, and natural gas prices eased 6 cents to $2.77 a thermal unit.
Gold decreased by $16.75 to $2,343.14 an ounce, and silver fell 9 cents to $31.96.
The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.73.
U.S. Stock Movers
Chewy jumped 6.5% to 18.0 after the online pet food store reported better-than-expected quarterly results.
Marathon Oil jumped 8.3% to $28.64 after the company agreed to be acquired by ConocoPhillips for $17.1 billion and assume $5.4 billion in debt.
Marathon Oil shareholders will receive 0.2550 shares of ConocoPhillips common stock for each share of Marathon Oil common stock, representing a 14.7% premium to the closing share price of Marathon Oil on May 28, 2024, and a 16.0% premium to the prior 10-day volume-weighted average price.
The deal is expected to be immediately attractive to ConocoPhillips shareholders.
After the transaction, the third-largest U.S. oil company plans to increase its dividend by 34% to 78 cents per share starting in the fourth quarter of 2024.
Upon closing of the transaction, ConocoPhillips expects share buybacks to be over $20 billion in the first three years, with over $7 billion in the first full year, at recent commodity prices.
The oil industry has experienced a wave of transactions in recent months. Exxon Mobil agreed to acquire Pioneer Natural Resources for $60 billion, and Hess' shareholders approved the merger of the company with Chevron.
Europe Movers: Anglo American, BHP, Oil Stocks, IDS
Inga Muller
29 May, 2024
Frankfurt
European stock market indexes declined, bond yields rose, and crude oil prices jumped ahead of the OPEC meeting this Sunday.
The DAX index decreased by 0.6% to 18,571.37; the CAC-40 index fell by 0.9% to 7,985.61; and the FTSE 100 index decreased by 0.2% to 8,234.89.
The yield on 10-year German bonds edged up to 2.62%; French bonds inched higher to 3.11%; the UK gilts edged lower to 4.35%; and Italian bonds inched higher to 3.93%.
International Distributions Services advanced 4% to 334.0 after the parent company of Royal Mail accepted a £3.57 billion takeover proposal from EP Group, controlled by Czech billionaire Daniel Kretinsky.
BHP Group gained 2.1% to 2,384.0 pence on a report that the mining company has requested Anglo American to extend the deadline for a final takeover proposal worth £39 billion.
Anglo American decreased 1.9% to 2,511.50 pence.
Oil explorers and refiners extended gains for the second day in a row amid rising tensions in the Middle East, and traders hoped that the OPEC member nations would extend production cuts at the next meeting this Sunday.
BP plc gained 1.6% to 493.60 pence, Shell PLC jumped 1.7% to 2,827.0, and TotalEnergies SE gained 0.4% to €66.43.
European Stocks Face Selling Pressure After Bond Yields Advance
Bridgette Randall
29 May, 2024
Frankfurt
The sharp selloff in the bond market weighed on stock market indexes, and the euro held its ground.
Bonds in the Euro Area sold off after the U.S. Treasury auction of 2-year and 5-year notes was weaker than anticipated.
The U.S. Treasury yields jumped following the unexpected weakness in the auction and sparked a selloff in worldwide bonds.
The yield on the 10-year German Bund increased to a 6-month high, the French bond yield advanced to a one-month high, and the UK 10-year government bond yield jumped to a three-week high.
Investors also pared back rate-cut expectations amid slow progress on disinflation and hawkish comments from policymakers in the U.S. and Europe.
Investors are also looking forward to the release of Germany's consumer price inflation data later in the day.
Benchmark indexes in London, Paris, and Frankfurt traded down, and crude oil prices advanced amid rising tensions in the Middle East.
Spain's Retail Sales Growth Slowed In April
Spain's retail sales increase slowed for the third month in a row, according to the data released by the statistical agency INE.
Retail sales in April rose 0.3% from a year ago, after an upwardly revised 0.9% increase in the previous month.
Retail sales rose at the slowest pace since November 2022, after spending on food and non-food items rose at a significantly slower pace.
On a monthly basis, Spain's retail sales rose 0.8%, reversing a 0.4% fall in the previous month.
In the first four months to April 2024, retail sales rose from a year ago by 0.9%.
Europe Indexes and Yields
The DAX index decreased by 0.6% to 18,571.37; the CAC-40 index fell by 0.9% to 7,985.61; and the FTSE 100 index decreased by 0.2% to 8,234.89.
The yield on 10-year German bonds edged up to 2.62%; French bonds inched higher to 3.11%; the UK gilts edged lower to 4.35%; and Italian bonds inched higher to 3.93%.
The euro edged higher to $1.084; the British pound inched higher to $1.274; and the U.S. dollar gained to 91.34 Swiss cents.
The euro approached a record high against the Japanese yen on the speculation that the European Central Bank is likely to take a slower approach to lowering its interest rate compared to the U.S. Federal Reserve.
The yen fell to this month's low of 170.44 and approached a record low of 171.56 against the euro.
Brent crude increased $0.17 to $84.75 a barrel, and the Dutch TTF natural gas fell by €0.21 to €33.31 per MWh.
Europe Stock Movers
International Distributions Services advanced 4% to 334.0 after the parent company of Royal Mail accepted a £3.57 billion takeover proposal from EP Group, controlled by Czech billionaire Daniel Kretinsky.
BHP Group gained 2.1% to 2,384.0 pence on a report that the mining company has requested Anglo American to extend the deadline for a final takeover proposal worth £39 billion.
Oil explorers and refiners extended gains for the second day in a row amid rising tensions in the Middle East, and traders hoped that the OPEC member nations would extend production cuts at the next meeting this Sunday.
BP plc gained 1.6% to 493.60 pence, Shell PLC jumped 1.7% to 2,827.0, and TotalEnergies SE gained 0.4% to €66.43.
The Rise In Global Bond Yields Weighs On Japanese Stocks and Yen
Akira Ito
29 May, 2024
Tokyo
Weak yen and global interest rate worries weighed on market sentiment in Tokyo ahead of the release of the inflation update.
The Nikkei and the Topix fell as much as 1%, and the yield on Japanese government bonds inched higher than 1% to a 12-year high after hawkish comments from non-voting members of the Federal Reserve's policymaker.
Market sentiment in Tokyo was also on the defensive after the U.S. Treasury yields unexpectedly rose following the weaker-than-expected auction of 2-year and 5-year Treasury notes.
The widening yield gap between the U.S. and Japan dragged the Japanese yen lower, and the currency traded at 157.86 against the U.S. dollar in late afternoon trading in Tokyo.
Investors are also looking ahead to the release of the Tokyo area's inflation data for April, and the city's inflation is generally seen as a bellwether of the nationwide price trends.
Japan Stock Movers
The Nikkei 225 stock average dropped 0.8% to 38,556.87, and the Topix index declined 1% to 2,741.62.
Stocks in Tokyo traded down on the ongoing monetary policy uncertainty and the weakness in the yen.
Mitsubishi UFJ rose 0.6% to ¥1,637.0 and traded at an 18-year high on the expectations of the company benefiting from the weaker yen and rising bond yields.
Last week, Mitsubishi UFJ reported a record profit of 1.5 trillion yen in the financial year 2024 and announced a stock repurchase program of 50 billion yen.
The company also announced the CET1 ratio, a measure of risk capital, to range between 9.5% and 10.5%, and a dividend payout ratio of around 40%.
Utilities and heavy industry-linked stocks were among the leading decliners.
Tokyo Electric Power dropped 8.3% to ¥926.30, Mitsubishi Heavy Industries declined 3.6% to ¥1,308.0, and Teijin Ltd. fell 5.5% to ¥1,519.0.
Diversified exporters and financial services were among the leading gainers.
Sompo Holding, the diversified insurance group, rose 4.2% to ¥3,306.0; Hoya Corp., the maker of optical products for the semiconductor industry, gained ¥18,635.0; and Konami Group, the video game publisher, gained 3.3% to ¥10,905.0.