U.S. and European Markets Approach Record Highs

Alexander Garcia
09 May, 2024
Miami

Stocks in New York traded higher after investors overcame morning jitters amid mixed quarterly results. 

The S&P 500 index and the Nasdaq Composite edged lower by 0.2% in early trading, the yield on 10-year Treasury notes edged lower, and crude oil prices advanced. 

Initial jobless claims for the week ending May 4 rose from 22,000 to 231,000, the U.S. Labor Department reported Thursday. 

The initial claims for unemployment benefits rose to their highest levels since August 2023, indicating tight labor market conditions may be moderating as economic growth slows down. 

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.2% to 5,208.16, and the Nasdaq Composite rose 0.26% to 16,354,82. 

The yield on 2-year Treasury notes edged lower to 4.85%, 10-year Treasury notes inched lower to 4.45%, and 30-year Treasury bonds edged lower to 4.65%.

Natural gas futures rose 5% to a four-month high on the expectations of the sustained rise in demand in the next two weeks. 

Natural gas supplies has declined by 2.3 billion cubic feet over the past six days, dropping to a four-month low of 95.5 bcfd, according to the data released by the U.S. Energy Information Administration.   

At the same time, electric power utilities added fewer-than-expected natural gas storage build, 79 billion cubic feet, last week.   

WTI crude oil increased $0.33 to $79.31 a barrel, and natural gas prices increased 9 cents to $2.27 a thermal unit.

Gold increased by $22.58 to $2,331.26 an ounce, and silver rose 81 cents to $28.12. 

The dollar index, which weighs the U.S. dollar against a basket of foreign currencies, edged lower to 105.31.

 

U.S. Stock Movers

Warner Bros. Discovery declined 4% to $7.49 after the media company reported weaker-than-expected quarterly results. 

Uber Technologies rose 0.8% to $66.90 after the company reported a loss in its latest quarter on Wednesday. 

Uber stock dropped as much as 7% after the quarterly results fell short of market expectations. 

Airbnb dropped 7.8% to $145.51 after the short-term rental platform operator reported better-than-expected first-quarter results, but the company's second-quarter revenue growth outlook fell short of investors' expectations. 

Arm Holdings PLC declined 6.6% to $99.08 after the advanced chip designer estimated full-year revenue to range between $3.8 billion and $4.1 billion. 

Robinhood Markets rose 6.7% to $19.02 after the trading platform operator reported revenue in the first quarter of $618 million and earnings per share of 18 cents, ahead of analysts' expectations. 

 

European Markets Pause 4-day Rally. BOE Holds Rates Steady

European markets rested after advancing for consecutive sessions in a row as investors digested the latest batch of corporate results and awaited the Bank of England's rate decision. 

The Bank of England held its interest rates steady for the eighth time in a row at 5.25% as the country battles persistent fuel and food price inflation and elevated service inflation. 

The Bank of England estimated U.K.'s economy to grow by 0.4% in the first quarter and advance 0.2% in the second quarter, and the consumer price inflation is expected to ease to 2% in the "near term."

The projections provided by the central bank also estimated interest rate to ease to 4.5% by the second quarter of 2025. 

Investors have been bidding up stocks in hopes that the European Central Bank is ready to announce its first rate cut decision at its next meeting, overlooking the weakness in consumer spending and weakening business sentiment. 

The euro is likely to face more selling pressure as rate paths in the U.S. and the eurozone diverge. 

Investors also reviewed the increase in China's imports in April, supporting the expectations of rising exports from the eurozone to the world's second-largest economy. 

 

Europe Indexes and Yields

The DAX index increased by 0.9% to 18,679.71; the CAC-40 index rose by 0.7% to 8,187.65; and the FTSE 100 index inched higher by 0.3% to a new intraday record of 8,381.35. 

The yield on 10-year German bonds edged down to 2.49%; French bonds inched lower to 2.99%; the UK gilts edged lower to 4.17%; and Italian bonds inched higher to 3.84%.

The euro edged higher to $1.073; the British pound inched higher to $1.249; and the U.S. dollar edged higher to 90.94 Swiss cents.

Brent crude increased $0.66 to $84.24 a barrel, and the Dutch TTF natural gas fell by €0.67 to €31.36 per MWh.

 

BBVA Makes Hostile Offer for Sabadell

Banco de Sabadell jumped 3.5% to €1.86 after BBVA proposed a €12.2 billion hostile takeover of the company.

BBVA declined 5.8% to €9.68 after Sabadell's board rejected the company's all-cash merger offer earlier this week. 

 

Resource and Luxury Stocks In Focus

Telefonica increased 0.1% to €4.19 after the Spanish telecom network operator reported better-than-expected quarterly results. 

Nexi increased 5.8% to €6.04 after the Italian payment processor reported better-than-expected first quarter results and launched its stock buyback program. 

China-linked luxury goods makers declined despite the second-largest economy reporting rising imports in April. 

LVMH fell 0.9% to €780.60, Hermes declined 0.8% to €2,287.0, and Kering SA dropped 0.9% to €328.20. 

ITV gained 1.6% to 75.55 pence despite the UK-based broadcasting company reporting a decline in first quarter revenue. 

BAE Systems rose 0.8% to 1,392.50 pence after the defense contractor reiterated its fiscal year 2024 outlook and delivered strong performance in the year so far. 

John Wood Group was nearly unchanged at 192.90 pence after the oil services company confirmed its outlook for fiscal years 2024 and 2025. 

 

BOJ Reiterates Accommodative Policy 

Benchmark indexes in Japan lacked direction, and the yen traded in a tight range after the release of the summary of the policy meeting held in April. 

Policy committee members highlighted the inflation risks from rising wages but reiterated their commitment to keeping the accommodative stance in purchasing Japanese government bonds. 

 

Real Wages Fall In Japan for the 27th Consecutive Month

On the wage front, Japan's inflation-adjusted real wages declined for the 24th month in a row in March, according to the latest data released by the Ministry of Health, Labor, and Welfare. 

Nominal cash wages, including overtime pay, increased 0.6% to 301,193 yen, or $1,940. 

Nominal wages rose for the 27th month in a row, but after adjusting for inflation, they continued to decline. 

The consumer price tracked for determining real wages rose 3.1% in March, significantly higher than the 0.6% rise in nominal wages. 

The full-time worker's average nominal wage increased by 0.8% to 386,795 yen, and the part-time worker's advanced by 2.5% to 108,036 yen. 

The total working hours per worker decreased by 2.7% from a year ago to 136.2 yen.

The latest data excludes the spring wage gains negotiated between the large companies and labor unions, and the government data showed only 20% of small and medium-sized businesses increased wages by more than 5%.

The so-called "shunto" wage negotiations, representing annual wage negotiations between the largest Japanese corporations and labor unions, generally set the tone for wage adjustments for other companies in Japan. 

The Japanese yen traded around  155.70 against the dollar, slightly higher than in the previous session. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average decreased 0.1% to 38,146.21, and the Topix index added 0.4% to 2,716.69. 

Leading tech companies traded sideways in choppy trading. 

SoftBank fell 2.5% to ¥7,736.0, Advantest declined 0.9% to ¥5,106.0, Screen Holdings advanced 0.6% to ¥17,600.0, and Tokyo Electron dropped 3% to ¥35,210.0. 

Sumitomo Mitsui Financial advanced 1.3% to ¥8,913.0, Mizuho Financial added 1.2% to ¥3,033.0, and Mitsubishi UFJ Financial gained 2.2% to ¥1,583.50. 

Earnings update lifted stocks of Omron and Orix but lowered Yamato Holdings.  

Omron Corp. rose 6.5% to ¥6,013.0, Orix advanced 6.5% to ¥3,426.0, and IHI jumped 8.3% to ¥4,119.0.

Yamato Holdings dropped 11.8% to ¥1,777.0.  

 

China Markets Rebound 1%, Trim Weekly Losses  

Benchmark indexes in Shanghai and Hong Kong drifted higher after China's exports rose more than expected, and investors pinned hopes regulators would follow through on promises of support measures for financial markets. 

 

China Trade Surplus Shrinks In April 

China's goods and services exports in April rose 1.5% to $292.5 billion, and imports advanced 8.4% to $220.1 billion from a year ago, respectively. 

The trade surplus in April fell to $72.4 billion, compared to $86.5 billion a year ago and $58.6 billion in March. 

Exports declined 7.5% and imports edged slightly lower from the previous month, respectively, the General Administration of  Customs reported Thursday.  

China's exports are likely to rebound in 2024 after slumping 4.6% in the previous year, indicating rising demand from the U.S. and ASEAN regions. 

However, imports are still struggling amid a fragile domestic economic recovery.

Exports to the U.S. declined 1.6% in April, dropped 3.3% to the European Union, but rose 20.4% to the ASEAN region from a year ago, respectively. 

China's international trade balance for the first four months was $255.7 billion, compared to $266 billion in the same period a year ago. 

Exports rose 1.5% to $1.1 trillion, and imports advanced 3.2% to $842.9 billion in the first four months of 2024. 

 

China Stock Movers 

The CSI 300 index gained 1% to 3,667.50, and the Hang Seng index advanced 1.1% to 18,538.57. 

The market mood was also bolstered in the hopes that more cities across China are likely to relax curb measures in support of the property market. 

Hangzhou eliminated several buyer qualification requirements imposed several years ago on home purchases following a similar move by the southwest city of Chengdu. 

In addition, as many as 55 cities have allowed the lowering of mortgage rates to support home sales, following the Politburo meeting in April. 

Longfor Group advanced 5.7% to HK$12.16, China Vanke jumped 8.8% to HK$4.84, and China Resources Land added 3.4% to HK$30.15. 

Automakers traded mixed in the hopes that rising exports will support the growth in electric vehicle makers' sales growth in the current quarter. 

BYD increased 0.4% to HK$225.20, Li Auto declined 1.1% to HK$107.80, Nio added 0.4% to HK$42.25, and Xpeng advanced 0.4% to HK$32.40. 

Benchmark indexes in Hong Kong soared more than 7% in April and extended gains by 4% in May in the hopes that regulatory reforms and supportive measures by the People's Bank of China will improve market confidence. 

However, measures announced by the local authorities are likely to fall short of market expectations, and consumer confidence remains weak amid an uneven economic recovery and a weakening job market.