U.S. and Global Markets Lack Momentum and the Yen Sinks Further In Search of a Bottom

Alexander Garcia
26 Jun, 2024
Miami

Benchmark indexes traded around the flatline, and tech stocks gave up early gains by late afternoon.  

The S&P 500 index and the Nasdaq Composite struggled to rise above the flatline as investors stayed cautious ahead of the release of inflation data later in the week. 

Broader averages have been overshadowed by the movement in Nvidia stock because the market cap-weighted S&P 500 index has been dominated by the chipmaker's $3.1 trillion valuation. 

Single-family new home sales in May declined 16.5% from a year ago to an annual pace of 619,000, the U.S. Census Bureau reported Wednesday. 

The home sale rate declined to the lowest pace in six months after high home prices and mortgage rates negatively affected home affordability. 

On the economic front, investors are looking ahead to the release of consumer spending, income, and PCE price inflation indicator updates for May. 

Investors in the U.S. are looking forward to the release of international trade balances, durable goods orders, and the third and final estimate for first quarter GDP growth.

 

U.S. Indexes and Treasury Yields

The S&P 500 index increased 0.01% to 5,469.89, and the Nasdaq Composite rose 0.3% to 17,760.45. 

The yield on 2-year Treasury notes edged lower to 4.73%, 10-year Treasury notes increased to 4.29%, and 30-year Treasury bonds edged higher to 4.42%.

WTI crude oil decreased $0.04 to $80.78 a barrel, and natural gas prices fell 2 cents to $2.79 a thermal unit.

Gold decreased by $17.47 to $2,302.27 an ounce, and silver declined 9 cents to $28.77. 

The dollar index, which weighs the U.S. currency against a basket of foreign currencies, edged lower to 106.05.

 

U.S. Stock Movers

FedEx rose 12.9% to $289.63, and the parcel delivery company reported better-than-expected revenue and adjusted earnings in its latest quarter. 

Rivian soared 29% to $15.38 after the electric vehicle struck a deal with the German automaker Volkswagen AG. 

Volkswagen plans to invest $1 billion in a joint venture with Rivian and increase its investment to as much as $5 billion over the next several years. 

Whirlpool Corporation rose 12.8% to $98.33 on a Reuters report that the German company Bosch is considering making an offer for the home appliance maker. 

Nvidia Corp. jumped 1.3% to $127.15, and the artificial intelligence chip maker extended its previous session gain of 7%. 

Nvidia's market value briefly surpassed Microsoft's market cap of $3.1 trillion before edging down in last week's trading.  

 

European Bond Yields In Focus Ahead of Elections in France and the UK 

European markets jumped higher amid election jitters, rate uncertainty, and a weak economic outlook. 

Benchmark indexes in Paris, London, and Frankfurt advanced despite the growing anxieties about the upcoming elections over the next week. 

Investors are bracing for a shift in the balance of power in France, as the party controlled by President Emmanuel Macron is likely to suffer significant losses. 

The shift in power in the legislative assembly is also likely to slow down economic reforms and delay France's goal of lowering its budget deficit below 5% of GDP by 2027. 

France's national debt is already hovering above 110% of GDP, one of the highest deficits in the world, and above the European Union average of 88.6%. 

In the UK, the Conservative Party is likely to suffer severe losses in the upcoming parliamentary election scheduled for July 4. 

The next government in the UK is also facing a severe jump in national debt after Prime Minister Rishi Sunak's government ramped up spending during the pandemic era, lifting the debt to 101.3% of GDP.

 

Europe Indexes and Yields

The DAX index increased by 0.3% to 18,155.24; the CAC-40 index fell by 0.7% to 7,609.15; and the FTSE 100 index fell by 0.3% to 8,225.33. 

The yield on 10-year German bonds edged higher to 2.43%. French bonds inched lower to 3.13%; the UK gilts edged higher to 4.10%; and Italian bonds increased to 3.92%.

The euro edged lower to $1.088; the British pound inched higher to $1.266; and the U.S. dollar advanced to 89.80 Swiss cents.

Brent crude decreased $0.50 to $85.53 a barrel, and the Dutch TTF natural gas rose by €0.49 to €34.04 per MWh.

 

Europe Stock Movers

Gelion PLC surged 51% to 28.0 pence after the Anglo-Australian battery company struck a joint development agreement with Glencore International AG. 

Volkswagen AG declined 2.7% to €103.65, and the German vehicle maker announced a $5 billion investment in a joint venture with the struggling electric vehicle maker Rivian. 

Checkit plc declined 3.3% to 22.25 pence after the automated monitoring system developer decided not to make an offer to acquire Crimson Tide. 

Deliveroo jumped 2.7% to 130.90 pence on reports suggesting that the U.S.-based delivery company DoorDash may be interested in acquiring the company. 

Energy explorers turned lower following the more than expected increase in U.S. inventories. 

Shell PLC decreased 0.4% to 2,796.0 pence, and BP plc declined 0.4% to 473.65 pence. 

 

Weak Yen Raises Intervention Risk 

Japan's two popular indexes traded higher for the second consecutive day following the rebound in tech stocks in New York. 

The Nikkei 225 and the Topix indexes closed higher after the rally in tech stocks overshadowed weakness in other sectors. 

Nvidia rebounded more than 6% in overnight trading in New York, supporting the advance in tech stocks in Tokyo. 

The yen's weakness also contributed to the market advance, as weak currency provides an additional boost to market indexes. 

The yen traded at 159.32 against the dollar, approaching a 34-year low and close to the mark that generally prompts intervention from the central bank. 

Currency traders are bracing for the yen to drop to as low as 170 over the next few months, as the Bank of Japan show little urgency in lifting rates. 

On the economic front, investors are looking ahead to the release of industrial output, retail sales, and the jobless rate later in the week. 

 

Japan Stock Movers 

The Nikkei 225 stock average rose 1.4% to 39,719.05, and the Topix index advanced 0.9% to 2,803.19.

Tech stocks were among the leading gainers in Tokyo following the rebound in artificial intelligence-linked stocks in New York. 

Screen Holdings, SoftBank, and Tokyo Electron gained between 3% and 5%. 

Advantest jumped 7.2% to ¥6,222.0, and the company said it is planning to generate annual revenue between 560 billion and 700 billion yen over the next two financial years. 

Toyota Motor and Nissan Motor declined more than 1%, but Honda Motor gained 1.9%. 

The weaker yen supported another advance in exporting companies, and Sony, Panasonic, Mitsubishi Electric, and Canon gained between 0.5% and 1.3%. 

The yield on a 10-year Japanese government bond traded at 1.02% amid uncertain interest rates and the Bank of Japan's reluctance to raise rates in the near term. 

Mitsubishi UFJ, Mizuho Financial Group, and Sumitomo Mitsui advanced between 0.3% and 1.2%. 

 

Rising Trade Tensions with the West Weigh On China Indexes 

Stocks in Shanghai and Hong Kong declined amid rising tensions between the second-largest economy and the European Union. 

The CSI 300 and the Hang Seng index edged lower to a four-month low as investors remained cautious ahead of the Communist Party's third plenum next week. 

Foreign investors have been reducing their stakes in China-based companies after policymakers and central bankers failed to provide concrete and far-reaching measures to revive consumer and investor sentiment. 

Chinese stocks are expected to trade in a tight range amid a lack of catalysts, an uneven economic recovery, rising trade tensions with the West, and a weak earnings growth outlook. 

 

China Stock Movers 

The CSI 300 index decreased 0.2% to 3,449.20, and the Hang Seng index eased 0.01% to 18,069.75. 

Game developers traded higher after China permitted the release of 104 new online games in June, higher than fewer than 100 games in the previous two months. 

NetEase soared 5.1% to HK $149.0, but Tencent Holdings decreased 0.6% to HK $379.80. 

Property developers were in focus after a court in Hong Kong granted Shimao Group a four-week period to secure a restructuring agreement with its creditors. 

Shimao Group gained 0.8% to HK$0.78. 

Electric vehicle makers were in focus after Canada announced plans to start a public hearing to impose import tariffs on passenger cars made in China. The move is likely to hit BYD the hardest. 

BYD Group decreased 1.5% to HK $238.40. 

Among the new listings, two companies made a strong debut in Shanghai. 

Aidite Technology, the maker of dental material, soared more than 90% to 85.95 yuan in Shenzhen on the first day of its trading, and Yonz Technology, the maker of photovoltaic products, jumped 55% to 35.80 yuan in Shanghai.