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Markets Update: Despite a slowdown in China and a weak yen near multi-decade lows, APAC stocks rose on expectations of U.S. rate cuts fueled by Jerome Powell's comments, with oil prices also gaining as investors awaited key data points including the Fed's meeting minutes.
Economic Calendar
Global Markets Roundup: 3 July 2024
APAC stocks saw an upswing on Wednesday, driven by Federal Reserve Chair Jerome Powell's remarks that fueled expectations of imminent U.S. rate cuts. Meanwhile, the yen remained at levels last seen in 1986, keeping traders alert for potential Japanese intervention.
Market Performance:
The MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) increased by 0.64%, buoyed by tech stocks. Japan's Nikkei NI225 surged 1.4%, nearing the record high set in March. European markets are poised to open higher, with Eurostoxx 50 futures FESX1! up 0.5% and German DAX futures DAX1! rising 0.34%. Attention remains on France's political landscape ahead of Sunday's runoff election. Chinese stocks underperformed, with the blue-chip CSI 300 index (399300) down 0.14%, while Hong Kong's Hang Seng HSI rose by 1%, driven by tech stocks. Data indicated that China's services activity expanded at the slowest pace in eight months, with confidence at a four-year low in June due to slower growth in new orders, highlighting the need for further economic stimulus.
Powell's Impact:
On Tuesday, Powell noted that the U.S. is back on a "disinflationary path" but stressed the need for more data before considering interest rate cuts. This led U.S. Treasury yields to drop by 4.3 basis points overnight, with the 10-year note yield steady at 4.435% during Asian trading on Wednesday, keeping the dollar subdued. Traders are now pricing in a 69% chance of a Fed rate cut in September, with up to two cuts expected this year, a significant shift from the 150 basis points of easing anticipated earlier in the year. Investors are also evaluating tight U.S. labor market data and are turning their focus to Friday's nonfarm payrolls report, with U.S. markets closing early on Wednesday and shut on Thursday. The Fed's latest meeting minutes, due later today, are expected to provide further insights into the rate outlook.
Currency Movements:
The prospect of a U.S. rate cut has kept the dollar's rise in check, with the dollar index DXY stable at 105.74. The yen USDJPY hit a new 38-year low of 161.875 per dollar and has remained near these levels since late June. The yen has depreciated over 12% against the dollar this year, impacted by the significant interest rate differential between the U.S. and Japan. This situation has turned the yen into a favored funding currency for carry trades. China's yuan eased to a seven-month low against the dollar as the central bank adjusted the currency's trading range slightly lower. Elsewhere, the euro EURUSD held steady at $1.07437, below Monday's two-week high, amid efforts by opponents of France's National Rally (RN) to block the far-right party from gaining power. Sterling GBPUSD traded at $1.26875, with the UK general election on Thursday expected to result in a landslide victory for the opposition Labour party.
Commodities and agricultural commodities:
Oil prices rose as U.S. industry data bolstered hopes for strong fuel demand during the summer driving season in the world's top oil-consuming nation. Brent crude oil futures BRN1! increased by 0.5% to $86.67 a barrel, while U .S. West Texas Intermediate crude futures CL1! climbed 0.46% to $83.19 per barrel. Spot GOLD was trading 0.2% higher at $2,334.56 Three-month copper on the London Metal Exchange HG1! climbed 0.2% to $9,694.50 per metric ton. CBOT wheat ZW1! edged 0.5% higher at $5.83-3/4 a bushel. September London cocoa CC2! traded 5.0% higher to 6,476 pounds per ton. September arabica coffee KC2! settled up 2.45 cents, or 1.1%, at $2.273 per lb.
Looking ahead today, markets anticipate, HCOB Composite PMI out of few EU countries and the UK, US ADP Employment Change, US Initial Jobless Claims, Canada Balance of Trade, US Factory Orders and ISM Services PMI, FOMC Minutes.
General news - Information source from multiple newswires.
The article and the data is for general information use only, not advice!
The Trade Academy Team
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