Rate Path and Economic Growth Worries Kept Indexes In Check Across Atlantic, India Indexes Plunged 6%

Alexander Garcia
04 Jun, 2024
Miami

Major averages on Wall Street traded marginally lower as investors assessed the economic growth outlook and the Fed's maneuvering room to lower interest rates. 

Investors hoped that the recent weakness in manufacturing activities in May and the slight decline in job openings in April would provide much-needed headroom for policymakers to consider a possible rate cut later in the year. 

The S&P 500 index and the Nasdaq Composite declined, and the yield on Treasury notes edged slightly lower after weak manufacturing data weighed on the market. 

Moreover, the Federal Reserve is likely to keep rates unrevised in the near future, as the central bank awaits solid evidence of inflation to be on a sustained downward path towards its target rate of 2%. 

In a busy week of economic reports, investors are looking forward to the release of the JOLT, or Job Openings and Labor Turnover Survey, and factor orders reports today, and the nonfarm payroll update for May is scheduled to be released on Friday. 

The number of job openings changed little, at 8.1 million in April, the U.S. Bureau of Labor Statistics reported today. 

The number of job openings declined by 296,000 from the previous month, the lowest level since February 2021. 

Job openings decreased by 204,000 in healthcare and social assistance, by 59,000 in state and local government education, but increased by 50,000 in private educational services. 

Over the month, both the number of hires and total separations were little changed, at 5.6 million and 5.4 million, respectively.

 

U.S. Indexes and Treasury Yields

The S&P 500 index decreased 0.2% to 5,271.99, and the Nasdaq Composite fell 0.3% to 16,793.31. 

The yield on 2-year Treasury notes edged lower to 4.80%, 10-year Treasury notes decreased to 4.36%, and 30-year Treasury bonds edged higher to 4.51%.

Crude oil prices declined for the fifth day in a row on the expectation of rising supply from OPEC+ member nations. 

Over the weekend, the oil-producing nations of OPEC+ announced their plans to keep production cuts until the end of the year in an effort to prevent the price of oil from sliding further. 

WTI crude oil decreased $0.66 to $73.58 a barrel, and natural gas prices fell 0.1 cents to $2.75 a thermal unit.

Gold decreased by $21.79 to $2,328.85 an ounce, and silver was down $1.20 to $29.52. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 104.29.

 

U.S. Stock Movers

Intel Corp. increased 0.3% to $30.33 after the advanced chip maker announced the release of new artificial intelligence chips as the company played catch with rivals Nvidia and AMD. 

Bath & Body Works declined 7.3% to $48.01 after the personal products and fragrance retailer topped revenue and earnings estimates in the first quarter, but the retailer's current quarter outlook fell short of market expectations. 

 

European Market Turn Lower Ahead of Rate Decisions

European markets gave up gains from the previous session as investors awaited monetary policy decisions on Thursday. 

Benchmark indexes in Paris, London, and Frankfurt declined between 0.5% and 1.2% in choppy trading, and bond yields in the region edged lower. 

 

Germany's Jobless Rate Held Steady at 5.9% In May 

Germany's seasonally adjusted jobless rate held steady at 5.9% for the sixth consecutive session in a row in May, the labor ministry reported Tuesday. 

The jobless rate rose to the highest level for the first time since June 2021. 

The number of unemployed persons increased by 25,000 to 2.76 million, marking the 17th month of rising unemployment in a row. 

 

U.K. Retail Sales Struggled to Advance in May 

The UK's retail sales rose at a slower annual pace in May, according to the latest report released by the British Retail Consortium. 

Total retail sales increased by 0.7% in May, slower than the 3.9% increase in the corresponding month a year ago. 

The increase in retail sales was above the 3-month average growth of 0.3% and below the 12-month average growth of 2.0%.

Food sales increased 3.6%, and non-food sales decreased 2.4% over the three months to May.

"Despite a strong bank holiday weekend for retailers, minimal improvement in weather across most of May meant only a modest rebound in retail sales last month," said Helen Dickinson, chief executive of the BRC. 

 

Europe Indexes and Yields

The DAX index decreased by 1.1% to 18,405.64; the CAC-40 index fell by 0.8% to 7,937.90; and the FTSE 100 index declined by 0.4% to 8,232.04. 

The yield on 10-year German bonds edged lower to 2.55%; French bonds inched lower to 3.04%; the UK gilts edged lower to 4.20%; and Italian bonds inched higher to 3.88%.

The euro edged higher to $1.086; the British pound inched higher to $1.275; and the U.S. dollar weakened to 89.35 Swiss cents. 

Brent crude decreased $1.35 to $77.01 a barrel, and the Dutch TTF natural gas declined by €1.06 to €35.09 per MWh.

 

Europe Stock Movers

A.P. Moeller Maersk decreased a fraction to DKK11,730, despite the company raising its annual profit outlook. 

British American Tobacco declined 1.2% to 2,405.0 pence after the cigarette maker said its first-half revenue and adjusted operating profit, on an organic and constant currency basis, were "single-digit." 

Wizz Air Holdings rose 0.4% to 2,428.0 pence after the deep discount air carrier said passenger booking jumped 2.1% and load factor improved slightly in May. 

Credit Agricole declined 1.2% to €14.70 after the French lender said its unit, Indosuez Wealth Management, has finalized the purchase of Bank Degroof Petercam. 

Vistry Group declined 1.3% to 1,291.0 pence after the home builder agreed to sell 1,750 homes to the private equity group Backstone and its partner Regis in a £580 million deal.

The group of "affordable homes" are located across 36 developments in south-east England and meets demands from housing associations and families. 

Vistry said most homes are expected to be delivered over the next two years, with the first batch of deliveries in June. 

 

Nikkei Index In Tokyo Halts a Two-day Rally, Automakers In Focus 

Japan's stock market indexes halted two-day gains amid weak market sentiment, valuation worries, and a lack of catalysts. 

The Nikkei and the Topix index turned lower following mixed closings in overnight trading in New York after the U.S. manufacturing sector contracted for the second month in a row, according to a private survey. 

The weakness in the U.S. manufacturing sector raised speculation that the U.S. Federal Reserve may be able to pass at least one rate cut before the end of the year. 

Automakers were in focus after Japanese automakers reported a 15.7% increase in vehicle sales in North America in May to 2.2 million units. 

Closer to home, investors are looking ahead to the release of Japanese wage and household data this week. 

The Japanese yen hovered near 156.03 against the U.S. dollar in late afternoon trading in Tokyo as investors continued to bet on additional weakness in the Japanese yen. 

Crude oil futures prices extended a two-day drop to 5% after OPEC+ announced its plans to phase out voluntary production cuts over the next year. 

Brent crude oil futures for immediate-month delivery decreased 1.1% to $77.64 per barrel. 

 

Japan Stock Movers 

The Nikkei 225 stock average decreased 0.4% to 38,766.29, and the Topix index dropped 0.4% to 2,786.64. 

Tech stocks were among the leading decliners following the weakness in overnight trading in New York. 

Advantest, Tokyo Electron, Screen Holdings, and Softbank declined between 0.3% and 1.2%. 

Banks lacked direction, and Sumitomo Mitsui traded nearly unchanged, Mizuho Financial declined 0.3%, and Mitsubishi UFJ fell 1.0%. 

Toyota Motor decreased 1.3% to ¥3,299.0 after the vehicle maker temporarily halted shipments of some models on safety concerns. 

Nissan Chemical advanced 4.2% to ¥4,814.0, and J. Front Retailing added 3.2% to ¥1,600.50. 

Diversified conglomerates, known as Shogo Shosha, traded down. 

Mitsui & Company fell 2.9% to ¥7,846.0, Mitsubishi Corp. fell 1.6% to ¥3,305.0, Marubeni declined 1.7% to ¥3,037.0, and Itochu decreased 1% to ¥7,457.0. 

 

Hopes of Additional Supportive Measures Lift China Indexes 

Market indexes in Hong Kong and Shanghai advanced, and the yuan faced headwinds as investors debated the strength of the economic recovery. 

The CSI 300 and Hang Seng indexes edged up in active trading as investors hoped policymakers were preparing to provide additional measures to support financial and property markets. 

Despite the recent flurry of announcements from the People's Bank of China, regulatory agencies, and leading policymakers, little has changed on the ground.

Consumer sentiment remains cautious amid weak job markets and an uneven economic recovery, which has generally bypassed small and medium businesses. 

Moreover, the announced measures to support the property market have failed to revive transactions and improve liquidity among large developers.

Foreign investors are also avoiding Chinese stocks, despite their cheap valuation and stable earnings, because of ongoing geopolitical tensions, regulatory uncertainty, and the government's policy favoring large domestic companies. 

The Chinese yuan traded around 7.25 against the U.S. dollar, and the yield on China's 10-year government bond held at 2.3% after a private survey showed activities in the manufacturing sector accelerated in May, contrasting the government survey showing a decline. 

 

China Stock Movers 

The CSI 300 index increased 0.4% to 3,602.60, and the Hang Seng Index advanced 0.2% to 18,441.59. 

Banks generally traded higher in Shanghai and Hong Kong in the hopes that the People's Bank of China may ease requirements for mortgage loans. 

Bank of China decreased 3.7% to HK$3.70, China Merchants Bank gained 0.1% to $35.30, and ICBC decreased 0.7% to $4.44. 

Vehicle makers traded higher ahead of international trade statistics later in the week, and investors are hoping that exports of electric vehicles are likely to sustain elevated growth. 

Li Auto fell 2.9% to $79.95, BYD added 0.4% to $231.40, and Xpeng decreased 1.3% to $32.25. 

Internet companies edged higher in Hong Kong as foreign investors searched for bargains in beaten-down stocks. 

Tencent Holdings increased 0.6% to $377.20, Meituan jumped 4.2% to HK$113.50, and Alibaba Group decreased 1.3% to HK$76.25. 

Property stocks advanced in the hopes of additional measures to improve liquidity among large developers. 

China Vanke, the largest residential developer in China, said sales in May increased from the prior month by 11.2% to US$3.2 billion. 

China Vanke jumped HK$5.75, China Resources Land added 3% to HK$30.10, and Longfor Group added 3.3% to HK$12.98. 

 

India Indexes Collapse 6% After Ruling Coalition Suffered Significant Setback In National Election

Market indexes on Dalal Street fell sharply in Tuesday's trading, as vote counting in the Lok Sabha election showed tighter-than-expected races in several leading states. 

The Sensex and the Nifty indexes dropped 5.8% after the BJP-led NDA alliance was ahead in 293 seats and the opposition alliance INDIA was leading in 232 seats. 

The early results were in sharp contrast to the expectations set by the leading exit polls for the NDA alliance to win at least 355 seats.

Prime Minister Narendra Modi's government is looking for a rare third term, and the winning coalition needs at least 272 seats to form the next government. 

In the 2019 general election, the NDA alliance won 352 seats and the opposition alliance of parties controlled 94 seats. 

In a broad market selloff, market indexes opened lower and continued to slide further as vote counting continued. 

At market close, the NDA was ahead in 295 seats, and the INDIA Bloc alliance was leading in 232 seats, placing the opposition alliance closer to forming a government, which every leading exit poll failed to predict. 

The BJP-led NDA is still likely to form the next government, but the slimmer majority of the alliance raises the prospect of an unstable government. 

 

Indexes and Yields

The Sensex index decreased by 5,8% to 72,079.05, and the Nifty index fell by 5.9% to 21,884.50.  

On the Mumbai stock exchange, 139 stocks traded at their 52-week highs, and 292 stocks traded at their 52-week lows.

The yield on the 10-year Indian government bonds inched lower to 6.94%, and the Indian rupee edged higher at ₹83.15 against the U.S. dollar.

The gold price increased by 0.01% to ₹72,211 per ten grams, and silver edged up by 0.5% to ₹92,045 per kilo.

Crude oil futures prices declined by 4% after OPEC+ announced its plans to end voluntary quotas over the next year. 

Crude oil decreased by 4.2% to ₹6,176 per barrel, and natural gas rose by 5% to ₹226.10 per thermal unit.