Market Update
Yen Drifts Near Recent 35-year Low, Japan's Business Sentiment Decline Softens
Akira Ito
13 Jun, 2024
Tokyo
In mixed trading, market indexes lacked direction in Tokyo ahead of the Bank of Japan's monetary policy decisions on Friday.
The Nikkei 2225 and the broader Topix index meandered around the flatline ahead of the widely anticipated Bank of Japan's decision to hold rates steady.
In addition, investors are looking forward to Governor Kazuo Ueda's comments about the central bank's plan to purchase government bonds.
The Japanese yen weakened to 157.07 against the U.S. dollar, and the yield on 10-year Japanese government bonds hovered near 0.976%.
The Bank of Japan is expected to hold interest rates steady, despite the recent acceleration in producer price inflation and rising inflationary pressures for consumers.
The central bank's dovish stance is likely to weigh heavily on the yen, and the Japanese currency is expected to weaken to between 165 and 170 over the next six months.
The Bank of Japan policymakers believe that a steady decline in the yen is the best possible outcome for the Japanese economy, supporting the price competitiveness of Japanese manufacturing products exported.
The business survey index of large manufacturing companies fell less than expected, and forward-looking expectations rebounded, according to the survey results released by the Cabinet Office.
The business climate index among large manufacturers declined by 1% in the second quarter after falling 6.7% in the first quarter.
The mood improved after manufacturing companies reported solid earnings in the first quarter and ramped up domestic capital spending.
Manufacturers anticipate business conditions to improve by 9.2% in the third quarter and 10.7% in the fourth quarter.
Japan Stock Movers
The Nikkei 225 Stock Average decreased 0.2% to 38,812.40, and the Topix Index fell 0.6% to 2,739.37.
In the tech sector, Advantest, Tokyo Electron, Disco Corp., and Screen Holdings declined between 0.8% and 3.5%.
Banks also participated in the downturn, and Mitsubishi UFJ, Mizuho Financial Group, and Sumitomo Mitsui fell more than 1%.
Among the leading gainers, Renaissance Electronics soared 4.9% to ¥3,101.0, Taio Yuen advanced 4.3% to ¥3,793.0, and Recruit Holdings jumped 2.5% to ¥7,910.0.
On the downside, Tokyo Electric Power, Chubu Electric Power, and Kansai Electric Power declined between 2% and 4%.
Konica Minolta, T&D Holdings, Eisai, and Denka fell around 3%.
China Markets Attempt to Rebound, EU Imposes Additional Tariffs On Chinese Electric Vehicles
Li Chen
13 Jun, 2024
Hong Kong
Benchmark indexes in Shanghai and Hong Kong rebounded amid hopes of additional market-supportive measures from the Chinese government.
The CSI 300 and the Hang Seng index inched higher from the one-month level reached in Wednesday's trading as investors pinned their hopes on new market-supportive measures from the People's Bank of China and local Chinese governments.
The three-monthlong market rally peaked in late May, and the benchmark indexes have lost as much as 9% in the last three weeks of trading.
However, market sentiment recovered on the hopes that weakening inflation in the U.S. may support the case for at least one rate cut before the year's end.
Moreover, the Hong Kong Monetary Authority held its key lending rate unchanged at 5.75%, reflecting the U.S. Federal Reserve's decision to hold its target rate range steady.
The Hong Kong dollar is linked to the U.S. dollar, and the city's monetary authority revises rates following the rate announcements by the U.S. Federal Reserve to maintain the local currency's peg with the U.S. dollar.
China Stock Movers
The CSI 300 index declined 0.4% to 3,528.92, and the Hang Seng index rose 0.5% to 18,034.42.
Electric vehicle makers advanced after the European Union's size of tariffs was deemed not restrictive enough for most Chinese vehicle makers.
The European Union imposed between 17.4% and 38% tariffs on electric vehicles imported from China, according to a statement released by the European Commission.
Companies participating in the seven-month EU probe faced a lower tariff rate, as tariffs imposed on Geely were 20% and on BYD 17.4%, but SAIC, which did not participate in the EU's subsidy probe, faced 38.1% import duties.
The new tariffs will be in addition to the existing duty of 10%, effective July 4.
Including the latest tariffs, Chinese vehicle makers will lose their price advantage but are likely to compete on design and advanced features, but makers may suffer from poor reliability and shoddy engineering practices.
Geely Automobile Holdings, the largest vehicle exporter to the European Union, is likely to face fewer-than-expected hurdles in exporting cars to the region.
Li Auto jumped 2.2% to HK$74.55, and BYD surged 6.5% to HK$234.20.
QuantumPharm, a drug researcher using artificial intelligence technology, advanced more than 10% from its initial public offering price of HK$5.28 on the first day of trading in Hong Kong.
India Movers: Bondada Engineering, One 360 WAM, PNB Housing, Saksoft, Tata Power
Arun Goswami
13 Jun, 2024
Mumbai
Market indexes continued their ascend in Mumbai, and the yield on Indian government bonds edged lower.
Core consumer price inflation dropped to a record low in May, and industrial output eased to a three-month low in April.
The Sensex index increased by 0.3% to 76,845.23, and the Nifty index rose by 0.3% to 23,391.95.
On the Mumbai stock exchange, 166 stocks traded at their 52-week highs, and 7 stocks traded at their 52-week lows.
The yield on the 10-year Indian government bonds inched higher to 6.99%, and the Indian rupee edged higher at ₹83.52 against the U.S. dollar.
Tata Power increased 1.7% to ₹457.0, and the company's renewable power subsidiary said it has installed 850 charging points in key metropolitan areas, including Mumbai, Delhi, Amdavad, Bengaluru, and Lucknow.
Saksoft advanced 3.2% to ₹268.50, and the company agreed to acquire Augmento Private Labs with an initial consideration of ₹35 crore and pay up to an additional ₹65 crore over the next two years.
Bondada Engineering jumped 5.0% to ₹2,320.80, and the company received an order worth ₹940 crore to set up a 600 MW solar power project over the next three years from NLC India.
PNB Housing Finance gained 0.5% to ₹819.95, and the company's board plans to meet on June 18 to approve the sale of non-convertible bonds worth ₹10,000 crore.
One 360 WAM increased 1.5% to ₹802.15, and the company signed an agreement to acquire ET Money from Times Internet for a total consideration of ₹365.8 crore.
One 360 WAM, formerly known as IIFL Wealth, agreed to pay 85.8 crore cash and issue 35 lakh crore shares to Times Internet.
ET Money claims to have 9 lakh registered users, including one lakh revenue-generating users, conducting over ₹1,200 crore of monthly investments over the platform.
Fed Holds Rates and Lowers Rate Cut Expectations In 2024
Brian Turner
12 Jun, 2024
Washington, D.C.
The Federal Reserve left the fed funds rate range unchanged between 5.25% and 5.50%, at the end of the two-day policy meeting.
The policymakers committee dialed back on the rate expectations and estimated rates to drop to 5.1% by the end of the year, down from March's estimate of as many as three rate cuts.
The committee also held 2024's GDP growth outlook at 2.1% and the unemployment rate at 4.0%.
But the committee revised its PCE inflation estimate to 2.6% from 2.4% in March and core inflation, which excludes food and energy price inflation, to 2.8% from 2.6%.
Fed officials estimated as many as four rate cuts in 2025, the fed funds rate to drop to 4.1% by the end of 2025, and additional cuts to bring down interest rates to 3.1% in 2026.
At the start of the year, investors were looking for as many as four cuts, but those expectations have been lowered after the persistent inflation over the last eighteen months.
Consumer price inflation peaked in June 2022 at 9.1%, and price pressures have steadily eased to 3% in June 2023.
However, inflation has failed to move lower over the last year and ranged between 3% and 4%, and core inflation has also failed to budge as well.
Despite eleven rate hikes in 2022 and 2023, inflation has failed to dip to the 2% target rate set by the Fed, indicating interest rates are not restrictive enough.
S&P 500 and Nasdaq Composite Scale New Highs, Inflation Cooled In May and Fed Holds Rates
Alexander Garcia
12 Jun, 2024
Miami
Market indexes built on the previous session's record highs as investors digested the latest update on inflation, and the Federal Reserve held rates steady as widely expected.
Stocks opened higher, and Treasury yields edged lower after consumer price inflation eased in May, raising hopes for at least one rate cut before the year's end.
The S&P 500 index and the Nasdaq Composite advanced more than 1% after consumer price and core inflation unexpectedly slowed in May.
Stocks have been under pressure for a few weeks due to rate uncertainty and the dashed hopes of rate cuts, but strong earnings and cooling inflation have stoked the market advance in recent days.
Despite the recent market volatility, the S&P 500 and the Nasdaq Composite closed at record highs, and in today's two bench mark indexes inched higher to set new records.
At the start of the year, investors were looking for as many as four cuts, but those expectations have been lowered after the persistent inflation over the last eighteen months.
Consumer price inflation peaked in June 2022 at 9.1%, and price pressures have steadily eased to 3% in June 2023.
However, inflation has failed to move lower over the last year and ranged between 3% and 4%, and core inflation has also failed to budge as well.
Despite eleven rate hikes in 2022 and 2023, inflation has failed to dip to the 2% target rate set by the Fed, indicating interest rates are not restrictive enough.
The Federal Reserve left the fed funds rate range unchanged between 5.25% and 5.50%, at the end of the two-day policy meeting.
The policymakers committee dialed back on the rate expectations and estimated rates to drop to 5.1% by the end of the year, down from March's estimate of as many as three rate cuts.
The committee also held 2024's GDP growth outlook at 2.1% and the unemployment rate at 4.0%.
But the committee revised its PCE inflation estimate to 2.6% from 2.4% in March and core inflation, which excludes food and energy price inflation, to 2.8% from 2.6%.
Fed officials estimated as many as four rate cuts in 2025, the fed funds rate to drop to 4.1% by the end of 2025, and additional cuts to bring down interest rates to 3.1% in 2026.
Consumer Price Inflation Cools In May but Stays elevated
The annual rate of consumer inflation unexpectedly cooled to 3.4% in May, the U.S. Bureau of Labor Statistics said on Wednesday.
Consumer price inflation decreased for the second month in a row and fell from 3.5% in March to 3.4% in April.
Food price inflation slowed to 2.1% from 2.2% in April, shelter inflation slowed to 5.4% from 5.5%, and transportation dropped 10.5% from 11.2%.
The annual rate of core inflation slowed to 3.4% in May, the lowest rate since April 2021.
On a monthly basis, consumer price inflation was unchanged from the previous month after rising 0.3% in April, and the monthly core rate of inflation slowed to 0.2% from 0.3% in the previous month.
U.S. Indexes and Treasury Yields
The S&P 500 index increased 1.1% to 5,436.70, and the Nasdaq Composite advanced 1.8% to 17,660.57.
The yield on 2-year Treasury notes edged lower to 4.69%, 10-year Treasury notes decreased to 4.29%, and 30-year Treasury bonds edged higher to 4.46%.
WTI crude oil increased $0.85 to $78.75 a barrel, and natural gas prices fell 8 cents to $3.04 a thermal unit.
Gold increased by $20.65 to $2,336.12 an ounce, and silver rose 85 cents to $30.10.
The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.33.
U.S. Stock Movers
Oracle Corp. soared 11.1% to $138.61 despite the database developer reporting weaker-than-expected quarterly results.
Investors bid up the stock after the company announced an artificial intelligence partnership with Google and OpenAI.
Rubrik declined 1.8% to $34.48 after the cloud computing company reported a weaker-than-expected outlook despite reporting higher-than-expected quarterly revenue of $187 million.
Rentokil Initial soared 14.5% to $30.89 after activist investor Trian Fund acquired a sizeable stake in the company.
European Markets Halted a two-day Selloff, French Politics In Uncharted Territory
European stock market indexes and bonds in the eurozone rebounded after two days of losses following France's surprise election announcement.
The euro held firm for the second day in active trading as investors still assessed the impact of French President Macron's surprise and controversial announcement to dissolve lower house of the parliament and call a legislative election.
The risky move threw French politics into turmoil and raised the prospect of the opposition winning control of the parliament, causing legislative gridlock and slowing down progress in lowering the government's debt, and deepening pension reforms.
Macron's minority government has struggled to win support for its legislative agenda for the last two years.
The results of the European Union election on Sunday showed the far-right political parties winning more seats, but the three leading blocs—the EPP, Renew Europe, and S&D—retained majority control after winning 407 of the 720 seats.
However, the shift to the right led to political upheaval in France, Germany, Austria, and Belgium.
French President Emmanuel Macron dissolved the parliament after the far-right National Rally Party garnered 31.5% of votes, more than 15.2% won by Macron's Renaissance party.
On the economic front, Germany's inflation rose for the first time in five months, as initially estimated, Destatis confirmed Wednesday.
Consumer price inflation in May accelerated to 2.4% from a stable 2.2% in April, which was the lowest level in three years.
Europe Indexes and Yields
The DAX index increased by 1.4% to 18,630.86; the CAC-40 index rose by 0.97% to 7,864.70; and the FTSE 100 index advanced by 0.8% to 8,215.48.
The yield on 10-year German bonds edged lower to 2.60%. French bonds inched lower to 3.20%; the UK gilts edged lower to 4.25%; and Italian bonds decreased to 4.03%.
The euro edged higher to $1.075; the British pound inched higher to $1.275; and the U.S. dollar weakened to 89.58 Swiss cents.
Brent crude decreased $0.78 to $82.70 a barrel, and the Dutch TTF natural gas rose by €0.79 to €34.93 per MWh.
Europe Stock Movers
French banks rebounded after two days of selloffs, and bond yields recovered.
Societe Generale gained 0.9% to €23.08, Credit Agricole rose 2.4% to €13.90, and BNP Paribas advanced 1.7% to €61.79.
Legal & General declined 5% to 230.89 pence after the newly appointed chief executive launched a restructuring plan to focus on three core units.
Rentokil Initial plc soared 12.3% to 466.40 pence after activist investor Trian Fund Management acquired a substantial stake in the company.
Skanska AB jumped 0.7% to SEK 186.90 after the Swedish construction company sold its multi-family rental business in Denmark to NREP for about 737 million Danish kroner, or 1.1 billion Swedish kronor.
Landore Resource surged 33% to 3.80 pence after the gold mining company secured £3.7 million to expand its gold project in Northwestern Ontario, Canada.
The BAM Gold Project, an early-stage development project, is estimated to have at least one million ounces of gold deposits.
The company sold 153.47 million shares at a price of 2.40 pence per share in a two-tranche offering to investors, representing 49.56% of the enlarged share capital.
Japan's Producer Price Inflation Accelerates Fourth Consecutive Month
Benchmark indexes in Tokyo traded down on Wednesday, trimming gains from the week and erasing gains from the previous session.
The Nikkei and the Topix indexes dropped more than 0.5% as investors reviewed the latest update on producer price inflation.
Producer price inflation rose 2.4% in May and accelerated for the fourth month in a row, the Bank of Japan reported on Wednesday.
Investors turned cautious after the annual pace of factory-gate price inflation rose faster than expected, stoking fears of an acceleration in consumer price inflation.
Producer price inflation was positive for the 40th month in a row, indicating manufacturers are passing higher raw material prices on to consumers.
Investors were also cautious ahead of the U.S. Federal Reserve's monetary policy decisions later in the day, and the central bank is widely anticipated to hold its interest rate range steady between 5.25% and 5.5%.
The Japanese yen weakened to 157.23 against the U.S. dollar, and the yield on a 10-year Japanese government bond stayed below 1% at 0.98%.
Japan Stock Movers
The Nikkei 225 stock average declined 0.5% to 38,913.50, and the Topix index fell 0.7% to 2,756.88.
Banks, tech companies, and vehicle makers were among the leading decliners.
Mitsubishi UFJ, Mizuho Financial Group, and Sumitomo Mitsubishi declined between 0.5% and 1.5%.
Softbank, Advantest, Tokyo Electron, and Screen Holdings traded mixed and ranged between a decline of 0.3% and a gain of 0.2%.
Toyota Motor decreased 1.4% to ¥3,208.0, Honda Motor rose 0.1% to ¥1,710.0, and Nissan Motor fell 0.1% to ¥545.30.
China Deflation Worries Keep Indexes In Hong Kong and Shanghai Down
Market indexes in Shanghai and Hong Kong traded down after the release of inflation data.
Consumer price inflation rose for the fourth month in a row in May, but the increase of 0.3% in May fell short of market expectations.
On a monthly basis, inflation decreased 0.1% after rising 0.1% in April, indicating persistent demand weakness amid a protracted property market slump and fragile economic recovery.
The annual pace of retail inflation was steady, but food price inflation fell for the 11th month in a row, the National Bureau of Statistics reported on Wednesday.
Core inflation, which excludes food and energy prices, rose 0.6% from a year ago, compared to a 0.7% rise in April.
In a separate report, the statistics bureau said producer price inflation declined 1.4% in May after falling at a 2.5% annual rate in April.
The factory-gate prices fell for the 20th month in a row and fell at the slowest pace since February 2023, amid persistent domestic demand weakness and rising job market uncertainty outside of the top three cities.
Over the first five months, producer price inflation dropped 2.4% from a year ago, and the prices are expected to remain weak for the rest of the year.
China Stock Movers
The CSI 300 index decreased 0.2% to 3,536.85, and the Hang Seng index dropped 1.5% to 17,913.10.
The Hang Seng index extended losses to 9% from the peak last month, as the market rally appears to lose steam amid a lack of consistent policy support and an ongoing decline in the residential property market.
Tech stocks traded lower amid broad market weakness, and Tencent Holdings declined 0.6% to HK$371.20 and Alibaba Group fell 0.9% to HK$74.15.
Real estate developers were under pressure ahead of the U.S. Federal Reserve's monetary policy decisions at 2:00 p.m. ET later today.
The Federal Reserve is widely anticipated to hold the Fed Funds rate range between 5.25% and 5.50%, and the central bank is likely to signal higher rates for the rest of the year.
Hong Kong monetary policy moves in sync with U.S. announcements because the Hong Kong dollar is linked to the U.S. dollar.
Higher interest rates for longer are likely to dampen demand for new properties in Hong Kong, amid an ongoing economic slowdown and elevated home prices in the city.
China Vanke declined 0.9% to HK$5.45, China Resources Land dropped 2.9% to HK$26.70, and Sun Hung Kai fell 1.1% to HK$71.95.
Wuhan Dameng Database, the database developer for banks and state-owned power entities' stock soared nearly 190% on the first day of trading after the company priced its initial offering at 250 yuan per share.
Tencent-backed QuantumPharm priced its initial public offering at HK$5.28 and raised HK$989.3 million ahead of its listing on Thursday.
The public offering of artificial intelligence-based drug research service provider was oversubscribed by 75 times.
U.S. Movers: Oracle, Rentokil Initial, Rubrik
Scott Peters
12 Jun, 2024
New York City
Oracle Corp. soared 11.1% to $138.61, despite the database developer reporting weaker-than-expected quarterly results.
Investors bid up the stock after the company announced an artificial intelligence partnership with Google and OpenAI.
Revenue in the fiscal fourth quarter ending in May rose 3% to $14.3 billion from $13.8 billion; net income dropped to $3.2 billion from $3.3 billion; and diluted earnings per share eased to $1.11 from $1.19 a year ago.
Rubrik declined 1.8% to $34.48, and the cloud computing company reported a weaker-than-expected outlook despite reporting higher-than-expected quarterly revenue of $187 million.
Revenue in the fiscal first quarter increased to $187 million from $135.7 million; net loss soared to $732.09 million from $89.3 million; and diluted loss per share expanded to $11.48 from $1.49 a year ago.
Rentokil Initial soared 14.5% to $30.89 after activist investor Trian Fund acquired a sizeable stake in the company.
S&P 500 and Nasdaq Hit New Record Highs After Inflation Cooled In May
Barry Adams
12 Jun, 2024
New York City
Stocks opened sharply higher, and Treasury yields edged lower after consumer price inflation eased in May, raising hopes for at least one rate cut before the year's end.
The S&P 500 index and the Nasdaq Composite advanced more than 1% after consumer price and core inflation unexpectedly slowed in May.
Stocks have been under pressure for a few weeks due to rate uncertainty and the dashed hopes of rate cuts.
At the start of the year, investors were looking for as many as four cuts, but those expectations have been lowered after the persistent inflation over the last eighteen months.
Consumer price inflation peaked in June 2022 at 9.1%, and price pressures have steadily eased to 3% in June 2023.
However, inflation has failed to move lower over the last year and ranged between 3% and 4%, and core inflation has also failed to budge as well.
Despite eleven rate hikes in 2022 and 2023, inflation has failed to dip to the 2% target rate set by the Fed, indicating interest rates are not restrictive enough.
The Federal Reserve is widely anticipated to leave the fed funds rate range unchanged between 5.25% and 5.50% later today at the end of the two-day policy meeting.
Consumer Price Inflation Cools In May but Stays elevated
The annual rate of consumer inflation unexpectedly cooled to 3.4% in May, the U.S. Bureau of Labor Statistics said on Wednesday.
Consumer price inflation decreased for the second month in a row and fell from 3.5% in March to 3.4% in April.
Food price inflation slowed to 2.1% from 2.2% in April, shelter inflation slowed to 5.4% from 5.5%, and transportation dropped 10.5% from 11.2%.
The annual rate of core inflation slowed to 3.4% in May, the lowest rate since April 2021.
On a monthly basis, consumer price inflation was unchanged from the previous month after rising 0.3% in April, and the monthly core rate of inflation slowed to 0.2% from 0.3% in the previous month.
U.S. Indexes and Treasury Yields
The S&P 500 index increased 1.1% to 5,435.82, and the Nasdaq Composite advanced 1.6% to 17,625.51.
The yield on 2-year Treasury notes edged lower to 4.69%, 10-year Treasury notes decreased to 4.29%, and 30-year Treasury bonds edged higher to 4.46%.
WTI crude oil increased $1.33 to $79.27 a barrel, and natural gas prices fell 8 cents to $3.04 a thermal unit.
Gold increased by $21.50 to $2,335.92 an ounce, and silver rose 65 cents to $29.95.
The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.38.
U.S. Stock Movers
Oracle Corp. soared 11.1% to $138.61 despite the database developer reporting weaker-than-expected quarterly results.
Investors bid up the stock after the company announced an artificial intelligence partnership with Google and OpenAI.
Rubrik declined 1.8% to $34.48 after the cloud computing company reported a weaker-than-expected outlook despite reporting higher-than-expected quarterly revenue of $187 million.
Rentokil Initial soared 14.5% to $30.89 after activist investor Trian Fund acquired a sizeable stake in the company.
Europe Movers: French Bank, Landore, Legal & General, Rentokil, Skanska
Inga Muller
12 Jun, 2024
Frankfurt
European stocks and bonds rebounded after a two-day selloff following Sunday's European Parliament election results.
French bond yields remained under pressure after the French president dissolved parliament and announced a surprise election that could lead to political gridlock until the next presidential election in 2027.
The DAX index increased by 0.6% to 18,471.95; the CAC-40 index rose by 0.4% to 7,818.58; and the FTSE 100 index advanced by 0.6% to 8,196.35.
The yield on 10-year German bonds edged lower to 2.60%. French bonds inched lower to 3.20%; the UK gilts edged lower to 4.25%; and Italian bonds decreased to 4.03%.
French banks rebounded after two days of selloffs, and bond yields recovered.
Societe Generale gained 0.9% to €23.08, Credit Agricole rose 2.4% to €13.90, and BNP Paribas advanced 1.7% to €61.79.
Legal & General declined 5% to 230.89 pence after the newly appointed chief executive launched a restructuring plan to focus on three core units.
Rentokil Initial plc soared 12.3% to 466.40 pence after activist investor Trian Fund Management acquired a substantial stake in the company.
Skanska AB jumped 0.7% to SEK 186.90 after the Swedish construction company sold its multi-family rental business in Denmark to NREP for about 737 million Danish kroner, or 1.1 billion Swedish kronor.
Landore Resource surged 33% to 3.80 pence after the gold mining company secured £3.7 million to expand its gold project in Northwestern Ontario, Canada.
The BAM Gold Project, an early-stage development project, spanning 30,507 hectares is estimated to have at least one million ounces of gold deposits.
The company sold 153.47 million shares at a price of 2.40 pence per share in a two-tranche offering to investors, representing 49.56% of the enlarged share capital.
European Markets Halted a two-day Selloff, French Politics In Uncharted Territory
Bridgette Randall
12 Jun, 2024
Frankfurt
European stock market indexes and bonds in the eurozone rebounded after two days of losses following France's surprise election announcement.
The euro held firm for the second day in active trading as investors still assessed the impact of French President Macron's surprise announcement of the parliamentary election.
The risky move threw French politics into turmoil and raised the prospect of the opposition winning control of the parliament, causing legislative gridlock and slowing down progress in lowering the government's debt.
The results of the European Union election on Sunday showed the far-right political parties winning more seats, but the three leading blocs—the EPP, Renew Europe, and S&D—retained majority control after winning 407 of the 720 seats.
However, the shift to the right led to political upheaval in France, Germany, Austria, and Belgium.
French President Emmanuel Macron dissolved the parliament after the far-right National Rally Party garnered 31.5% of votes, more than 15.2% won by Macron's Renaissance party.
On the economic front, Germany's inflation rose for the first time in five months, as initially estimated, Destatis confirmed Wednesday.
Consumer price inflation in May accelerated to 2.4% from a stable 2.2% in April, which was the lowest level in three years.
Europe Indexes and Yields
The DAX index increased by 0.6% to 18,471.95; the CAC-40 index rose by 0.4% to 7,818.58; and the FTSE 100 index advanced by 0.6% to 8,196.35.
The yield on 10-year German bonds edged lower to 2.60%. French bonds inched lower to 3.20%; the UK gilts edged lower to 4.25%; and Italian bonds decreased to 4.03%.
The euro edged higher to $1.075; the British pound inched higher to $1.275; and the U.S. dollar weakened to 89.58 Swiss cents.
Brent crude decreased $0.77 to $81.68 a barrel, and the Dutch TTF natural gas rose by €1.08 to €35.22 per MWh.
Europe Stock Movers
French banks rebounded after two days of selloffs, and bond yields recovered.
Societe Generale gained 0.9% to €23.08, Credit Agricole rose 2.4% to €13.90, and BNP Paribas advanced 1.7% to €61.79.
Legal & General declined 5% to 230.89 pence after the newly appointed chief executive launched a restructuring plan to focus on three core units.
Rentokil Initial plc soared 12.3% to 466.40 pence after activist investor Trian Fund Management acquired a substantial stake in the company.
Skanska AB jumped 0.7% to SEK 186.90 after the Swedish construction company sold its multi-family rental business in Denmark to NREP for about 737 million Danish kroner, or 1.1 billion Swedish kronor.
Landore Resource surged 33% to 3.80 pence after the gold mining company secured £3.7 million to expand its gold project in Northwestern Ontario, Canada.
The BAM Gold Project, an early-stage development project, is estimated to have at least one million ounces of gold deposits.
The company sold 153.47 million shares at a price of 2.40 pence per share in a two-tranche offering to investors, representing 49.56% of the enlarged share capital.
Japan's Producer Price Inflation Accelerates Fourth Consecutive Month, Stoking Fears of a Pick Up in Consumer Inflation
Akira Ito
12 Jun, 2024
Tokyo
Benchmark indexes in Tokyo traded down on Wednesday, trimming gains from the week and erasing gains from the previous session.
The Nikkei and the Topix indexes dropped more than 0.5% as investors reviewed the latest update on producer price inflation.
Producer price inflation rose 2.4% in May and accelerated for the fourth month in a row, the Bank of Japan reported on Wednesday.
Investors turned cautious after the annual pace of factory-gate price inflation rose faster than expected, stoking fears of an acceleration in consumer price inflation.
Producer price inflation was positive for the 40th month in a row, indicating manufacturers are passing higher raw material prices on to consumers.
Investors were also cautious ahead of the U.S. Federal Reserve's monetary policy decisions later in the day, and the central bank is widely anticipated to hold its interest rate range steady between 5.25% and 5.5%.
The Japanese yen weakened to 157.23 against the U.S. dollar, and the yield on a 10-year Japanese government bond stayed below 1% at 0.98%.
Japan Stock Movers
The Nikkei 225 stock average declined 0.5% to 38,913.50, and the Topix index fell 0.7% to 2,756.88.
Banks, tech companies, and vehicle makers were among the leading decliners.
Mitsubishi UFJ, Mizuho Financial Group, and Sumitomo Mitsubishi declined between 0.5% and 1.5%.
Softbank, Advantest, Tokyo Electron, and Screen Holdings traded mixed and ranged between a decline of 0.3% and a gain of 0.2%.
Toyota Motor decreased 1.4% to ¥3,208.0, Honda Motor rose 0.1% to ¥1,710.0, and Nissan Motor fell 0.1% to ¥545.30.
China Deflation Worries Keep Indexes In Hong Kong and Shanghai Down
Li Chen
12 Jun, 2024
Hong Kong
Market indexes in Shanghai and Hong Kong traded down after the release of inflation data.
Consumer price inflation rose for the fourth month in a row in May, but the increase of 0.3% in May fell short of market expectations.
On a monthly basis, inflation decreased 0.1% after rising 0.1% in April, indicating persistent demand weakness amid a protracted property market slump and fragile economic recovery.
The annual pace of retail inflation was steady, but food price inflation fell for the 11th month in a row, the National Bureau of Statistics reported on Wednesday.
Core inflation, which excludes food and energy prices, rose 0.6% from a year ago, compared to a 0.7% rise in April.
In a separate report, the statistics bureau said producer price inflation declined 1.4% in May after falling at a 2.5% annual rate in April.
The factory-gate prices fell for the 20th month in a row and fell at the slowest pace since February 2023, amid persistent domestic demand weakness and rising job market uncertainty outside of the top three cities.
Over the first five months, producer price inflation dropped 2.4% from a year ago, and the prices are expected to remain weak for the rest of the year.
China Stock Movers
The CSI 300 index decreased 0.2% to 3,536.85, and the Hang Seng index dropped 1.5% to 17,913.10.
The Hang Seng index extended losses to 9% from the peak last month, as the market rally appears to lose steam amid a lack of consistent policy support and an ongoing decline in the residential property market.
Tech stocks traded lower amid broad market weakness, and Tencent Holdings declined 0.6% to HK$371.20 and Alibaba Group fell 0.9% to HK$74.15.
Real estate developers were under pressure ahead of the U.S. Federal Reserve's monetary policy decisions at 2:00 p.m. ET later today.
The Federal Reserve is widely anticipated to hold the Fed Funds rate range between 5.25% and 5.50%, and the central bank is likely to signal higher rates for the rest of the year.
Hong Kong monetary policy moves in sync with U.S. announcements because the Hong Kong dollar is linked to the U.S. dollar.
Higher interest rates for longer are likely to dampen demand for new properties in Hong Kong, amid an ongoing economic slowdown and elevated home prices in the city.
China Vanke declined 0.9% to HK$5.45, China Resources Land dropped 2.9% to HK$26.70, and Sun Hung Kai fell 1.1% to HK$71.95.
Wuhan Dameng Database, the database developer for banks and state-owned power entities' stock soared nearly 190% on the first day of trading after the company priced its initial offering at 250 yuan per share.
Tencent-backed QuantumPharm priced its initial public offering at HK$5.28 and raised HK$989.3 million ahead of its listing on Thursday.
The public offering of artificial intelligence-based drug research service provider was oversubscribed by 75 times.
India Movers: Cipla, Patanjali Foods, Tube Investments, TVS Supply Chain
Arun Goswami
12 Jun, 2024
Mumbai
Market indexes advanced in Mumbai's trading as investors awaited the release of industrial output and consumer price inflation data.
The Sensex index increased by 0.4% to 76,743.39, and the Nifty index rose by 0.4% to 23,353.70.
On the Mumbai stock exchange, 65 stocks traded at their 52-week highs, and 6 stocks traded at their 52-week lows.
The yield on the 10-year Indian government bonds inched higher to 7.03%, and the Indian rupee edged higher at ₹83.48 against the U.S. dollar.
Cipla increased 0.8% to ₹1,542.45, and the generic pharmaceutical company lost a preliminary appeal in a court in Patna, Bihar, for a tax credit. The company said it plans to appeal the decision.
Patanjali Foods gained 1.3% to ₹1,492.40, and the food and vitamin supplement maker said it plans to acquire the nonfood business of Patanjali Ayurved Ltd.
The company's proposal will be reviewed by a committee of independent board members, and the committee may seek external help in determining the valuation for the proposed transaction.
TVS Supply Chain Solutions jumped 7.1% to ₹180.69, and the company said it signed a five-year agreement with Daimler Truck South East Asia Pte Ltd. for an integrated supply chain solution service in Singapore.
Tube Investments of India jumped 1.4% to ₹180.69, and the company signed an agreement with South Asia Growth Invest III LLC and South Asia EBT Trust III LLC to facilitate the sale of ₹160 crore convertible preference shares.
Elevate Inflation Data May Upend the Fed's Narrative of Restrictive Rates
Alexander Garcia
11 Jun, 2024
Miami
Stocks lacked direction as the Federal Reserve policymakers kicked off a two-day meeting.
Stocks were in a holding pattern in early trading on Tuesday as investors awaited rate decisions and consumer price inflation data on Wednesday.
The S&P 500 index and the Nasdaq Composite lacked direction, and investors looked forward to the release of the Fed's monetary policy decision on Wednesday.
The Federal Reserve is widely anticipated to hold the Fed Funds rate range between 5.25% and 5.50% after the two-day policy meeting that starts today.
Investors are hoping that in the subsequent press conference, Fed Chairman Jerome Powell's comments and answers may provide deeper insights into future rate paths and possible rate cut timing.
Investors have lowered rate cut expectations to only one cut at the end of the September meeting, from the expectations of four rate cuts at the start of the year.
The Federal Reserve has raised rates eleven times in 2022 and 2023, but inflation has still remained above the Fed's target rate of 2%.
The Fed's rate hikes have clearly not slowed the economy; labor market conditions are moderating but still tight, and wages are still rising at a significantly faster rate of 4%.
Fed policymakers talk tough, but when it comes to fighting inflation, they take a softer and slower approach.
While policymakers are promoting the Fed's goal of price stability in public discourse, over the last four years, home prices have surged more than 100% in the fifty largest metropolitan areas, food prices have more than doubled, and the cost of most services is running ahead by 50% or more.
The Federal Reserve has no plans to bring down these skyrocketing prices of shelter and food, which have severely hit the hard-earned pockets of most families.
The Federal Reserve needs better and more advanced tools than a mere change in interest rate to tackle inflation, which was created in the first place by the central bank's reckless money printing during the COVID-19 pandemic.
U.S. Indexes and Treasury Yields
The S&P 500 index decreased 0.2% to 5,352.22, and the Nasdaq Composite rose 0.2% to 17,240.55.
The yield on 2-year Treasury notes edged lower to 4.85%, 10-year Treasury notes decreased to 4.44%, and 30-year Treasury bonds edged higher to 4.58%.
WTI crude oil increased $0.40 to $78.14 a barrel, and natural gas prices rose 16 cents to $3.07 a thermal unit.
Gold increased by $1.04 to $2,310.94 an ounce, and silver was down 55 cents to $29.16.
The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 105.30.
U.S. Stock Movers
General Motors jumped 1.4% to $48.34 after the company's board authorized a $6 billion stock repurchase plan.
Eli Lilly jumped 2.4% to $887.0 after a panel of FDA advisors recommended the approval of the company's drug to treat Alzheimer, donanemab.
Oracle Corp. declined 1.2% to $124.12 ahead of the software and database developer's quarterly results after the close of regular trading.
DXC Technology jumped 2.3% to $18.88 on a report that Apollo Global and Kyndryl Holdings are nearing a bid between $22 and $25 a share for the company.
The news was first reported by Reuters and could not be independently verified.
Cognizant traded down 1% to $66.25, and the company agreed to acquire Cincinnati-based Belcan for $1.3 billion in cash and stock.
European Markets Drop for the Second Day Amid Growing Political Turmoil in France and Germany
Rising political uncertainty and France's snap election announcement added to market anxieties in European trading.
Benchmark indexes in Paris, London, and Frankfurt declined for the second day in a row and extended 2-day losses to nearly 2%.
Far-right parties showed significant gains in the European Union parliament election, but leading mainstream parties retained the dominant position in this Sunday's election.
However, extreme right-wing parties in Germany, Austria, and France won a significant proportion of votes, signaling voter displeasure with the established parties.
The protest votes were largely about the failure of the governments in Germany and France to tackle economic stagnation, ineffective policies to stem rising immigration, and the high cost of living.
In a surprise move, French President Emmanuel Macron announced the dissolution of the parliament after the far-right National Rally Party won more than 30% of votes, twice as many as Macron's Renaissance Party.
President Macron's move is widely seen in French political circles as a risky gamble that could lead to a shift of power in parliament and significantly hinder the domestic economic and political agenda.
France will hold two-round national assembly elections on June 30 and July 7, just weeks before the start of the Olympic Games in Paris.
The French government's bond yield jumped to a 20224's high of 3.30% amid rising uncertainty.
Europe Indexes and Yields
The DAX index decreased by 0.7% to 18,369.94; the CAC-40 index fell by 1.3% to 7,789.21; and the FTSE 100 index declined by 0.95% to 8,147.81.
The yield on 10-year German bonds edged higher to 2.66%. French bonds inched higher to 3.30%; the UK gilts edged lower to 4.29%; and Italian bonds inched higher to 4.13%.
The euro edged higher to $1.074; the British pound inched higher to $1.274; and the U.S. dollar weakened to 89.65 Swiss cents.
Brent crude decreased $0.37 to $82.01 a barrel, and the Dutch TTF natural gas fell by €0.21 to €34.21 per MWh.
Europe Stock Movers
Rio Tinto declined 2.5% to 5,223.0 pence after the Anglo-Australian mining company agreed to acquire Mitsubishi Corp.'s 11.65% stake in Boyne Smelters for an undisclosed amount.
Societe Generale declined 2.9% to €23.39 on reports that the French lender is struggling to sell its securities services unit.
Senior plc gained 1.1% to 160.0 pence after the maker of high-tech components for aerospace and defense equipment received several orders from Collins Aerospace.
FirstGroup rose 1.1% to 169.90 pence after the private railroad and bus service operator reported a decline in annual revenue.
Revenue in the fiscal year 2024 ending in March declined to £4.71 billion from £4.76 billion, adjusted operating profit rose to £202.4 million from £154.0 million, and adjusted earnings per share rose to 16.4 pence from 10.7 pence a year ago.
The increase in adjusted operating profit was driven by one extra week of trading and higher accrued variable fees in Frist Rail.
The company reiterated its fiscal year 2025 outlook and confirmed its plans to complete the share buyback before financing any new growth initiatives.
Atos SE decreased 11.4% to €1.01 after the French information technology company selected a financial restructuring proposal led by Onepoint, Butler Industries, and Econocom.
Yen Approached Recent Low and JGB Yield Rebounded Above 1% Ahead of BoJ's Rate Decisions
Benchmark indexes in Tokyo extended gains for the second day in a row, tracking gains in tech stocks in overnight trading in New York.
The Nikkei 225 and the Topix indexes diverged in lackluster trading, and tech stocks powered the market advance in Tuesday's trading.
The yen weakened to 157.25 against the U.S. dollar, and the yield on a 10-year Japanese government bond rebouned to 1.02% ahead of the Bank of Japan's monetary policy decisions on Thursday.
The BoJ is widely expected to hold rates steady and continue its purchase of Japanese government bonds, fueling another leg down in the yen.
The U.S. Federal Reserve is expected to hold its interest rate range steady between 5.25% and 5.50%, and the central bank is also likely to cool down rate expectations further.
The wide yield differential between the U.S. and Japan is likely to persist as the Bank of Japan shows no interest in lifting near-zero rates, despite the cost of rising imports.
The persistent yield gap is also putting additional pressure on the yen, and currency traders are bracing for the price to range between 165 and 170 before the year's end.
Japan Stock Movers
The Nikkei 225 Stock Average increased 0.2% to 39,098.62, and the Topix index fell 0.2% to 2,776.43.
Tech stocks led the gainers for the second day in a row, and Tokyo Electron, Advantest, Screen Holdings, and Socionext gained between 0.3% and 1.2%.
However, Softbank bucked the trend and edged lower by 0.6% to ¥9,666.0.
Automotive stocks lacked direction after investors looked for bargains in the beaten-down sector after a certification scandal engulfed the vehicle makers.
Toyota Motor decreased 0.5% to ¥3,254.0, Honda Motor was unchanged at ¥1,708.0, and Nissan Motor edged up 0.05% to ¥545.40.
Banks were in focus in active trading ahead of the Bank of Japan's rate decisions on Thursday.
Mitsubishi UFJ decreased 1.0.2% to ¥1,632.50, Sumitomo Mitsui declined 0.8% to ¥10,280.0, and Mizuho Financial fell 0.2% to ¥3,141.0.
Taiyo Yuden Company, the materials and electronics engineering company, advanced 3.3% to ¥3,576.0, and Ebara, the maker of turbines and pumps, increased 3.4% to ¥12,165.0.
Eisai Company decreased 3.3% to ¥6,649.0.
China Indexes Extended Downward Trend Ahead of Inflation Data
Market indexes in Shanghai and Hong Kong traded lower as investors set aside rate-cut expectations in the U.S. and China.
The CSI 300 and the Hang Seng indexes declined and trimmed this year's gains after property market worries and an uneven economic rebound overwhelmed market sentiment.
The Hang Seng index has dropped 8% from its high in May after China's weak import growth suggested weak domestic demand, and the weakness in manufacturing sector growth also contributed to market nervousness.
China is set to announce its inflation data on Wednesday, and economists are anticipating a slight pick-up in inflation, and consumer price inflation in May is likely to accelerate to an annual pace of 0.4% from the 0.3% pace in April.
The U.S. is also set to announce its inflation update on Wednesday, followed by the Federal Reserve releasing its monetary policy decisions and economic projections.
The Federal Reserve is expected to hold steady its interest rate range between 5.25% and 5.50% and provide insights into the possible rate cut later in the year.
Investors have lowered their rate-cut expectations to one from as high as four earlier in the year.
China Stock Movers
The CSI 300 index declined 1.1% to 3,533.97, and the Hang Seng index dropped 1.7% to 18,056.13.
Li Auto declined 4% to HK$74.90, BYD increased 2% to $229.20, and Nio decreased 3.4% to $36.95.
The Bank of China declined 2.7% to HK$3.71, and the and the Industrial and Commercial Bank of China decreased 1.5% to HK$4.35.
Gold mining and jewelry retailers traded down after the People's Bank of China halted its 18-month-long steady purchase of gold.
Zijin Mining Group declined 4.5% to HK$16.66, and Chow Tai Fook Jewellery Group fell 3.5% to HK$9.41.