A look at the day ahead in the US and global markets by Mike Dolan
Nvidia, the Nasdaq and the S&P500 hit record highs on Thursday as global markets begin to take stock of a bumper 2024 as we head into the half next week – but with the dollar returning regardless.
The latest US economic figures show some slowdown in activity in May and June, but the trigger for the mega-cap decline was far from clear – notably with the real-time “GDPNow” estimate from the Atlanta Federal Reserve still showing rapid growth of 3% for the quarter.
The scale of recent tech gains may have been too rapid as mid-year accounts prompt a pause – and perhaps investors are now bracing for a more turbulent second half after November’s US election . Next Thursday’s televised presidential debate could be a wake-up call in this sense.
Either way, Nvidia’s 3.5% drop that day means it once again ceded its brief role as the most valuable company to Microsoft and the tech-heavy Nasdaq ended its trading. a seven-day streak of closing records.
The broader equity complex was more mixed, however, with the blue-chip Dow Jones gaining 0.7% and the small-cap Russell 2000 flat on the day.
Despite a further weakening of Treasury yields following failures in housing starts and jobless claims, the dollar continued to gain strength.
And the greenback’s gains have been quite widespread – against European currencies, where central bank rate cuts and easing bets are increasing, but also against the Japanese yen and Chinese yuan in Asia. The DXY index has touched its highest level in almost two months.
Foreign money is leaving China again – amid growing global trade tensions and few signs of an end to that country’s real estate collapse, Chinese stocks and the yuan have seen another end mediocre after an austere week.
About 33 billion yuan ($4.54 billion) left the mainland this month through the northern part of the Stock Connect program – after four months of net inflows.
With an eye on the Chinese Communist Party central committee plenum next month, G7 countries increasing pressure on Chinese electric vehicle exports and Beijing considering retaliation, the yuan fell to its lowest level this year on Friday .
China’s Commerce Ministry said Friday that the European Union continues to escalate trade frictions, which “could trigger a trade war.”
The Japanese yen is weakening rapidly again, as doubts over the timing of Bank of Japan tightening are reinforced by lower-than-expected inflation figures, which have seen consumer price growth excluding energy and fresh produce fall to just 2.1% last month.
That took the dollar/yen above 159 for the first time since late April, when the BOJ last intervened to cap it, and prompted a new round of warnings from Japanese officials.
Against the backdrop of the Swiss National Bank’s second interest rate cut of the year on Thursday, the dollar also rose against European currencies.
Sterling fell to its lowest level in more than a month, even after the Bank of England left key rates steady ahead of Britain’s July 4 election, amid bets on a rate cut in August rose when the BoE indicated its policymaker was 7 to 2. the split in favor of holding the line was “finely balanced.”
News of a rebound in British retail sales last month after a weather-related slump in April did little to change the situation.
And the euro fell back to the lows reached last week due to political upheaval in France, with June economic surveys for the euro zone showing a sharper slowdown in activity than expected.
The currency bloc’s services sector showed signs of weakening while the slowdown in the manufacturing sector deepened.
Back on Wall Street, S&P Global’s equivalent surveys for the United States are expected to be released later on Friday.
S&P500 futures were slightly in the red before the bell.
Separately, China on Friday imposed countermeasures on relevant entities and senior Lockheed Martin executives following US arms sales to Taiwan.
And British financial technology company Revolut could be valued at more than $40 billion in a share sale, although it is still awaiting a UK banking license, according to people familiar with the matter.
Main developments that should further orient US markets later on Friday:
* S&P Global’s Flash US economic surveys for June, existing home sales in May; April retail sales in Canada
*San Francisco Federal Reserve Chair Mary Daly speaks
* German Economy Minister Robert Habeck speaks in Beijing
* ECOFIN meeting of European Union Finance Ministers in Luxembourg, in the presence of the Vice-President of the European Central Bank, Luis de Guindos.
* Profits of American companies: Carmax, Factset
(By Mike Dolan, editing by Mark Heinrich mike.dolan@thomsonreuters.com)
