Stock indices have hit all-time highs. The Australian labor market is starting to cool down :: InvestMacro

By JustMarkets

At Wednesday’s close, the Dow Jones (US30) Index increased by 0.88%, while the S&P 500 (US500) Index was up 1.17%. The NASDAQ Technology Index (US100) closed positive 1.41%. All three indices hit all-time highs yesterday. Stocks rose on lower bond yields after US consumer prices declined as expected. In addition, reports on the US retail sales, the Empire Manufacturing Index, and the NAHB Housing Index were weaker than expected, raising the possibility that the Fed will cut interest rates this year.

The US Consumer Price Index for April declined to 3.4% y/y from 3.5% y/y in March, which was in line with expectations. The Consumer Price Index excluding food and energy (core) for April declined to 3.6% y/y from 3.8% y/y in March, matching expectations and the lowest in 3 years. The US retail sales for April were unchanged m/m, weaker than expectations of 0.4% m/m. However, retail sales excluding autos rose by 0.2% m/m in April, which was in line with expectations. The Empire’s Index of overall business conditions in the US manufacturing sector for May unexpectedly declined by 1.3 to 15.6, which was weaker than expectations for a rise to 10.0.

Markets estimate the odds of a 25 bps rate cut at 10% at the June 11–12 FOMC meeting and 38% at the next meeting on July 30–31.

Equity markets in Europe were mostly up on Wednesday. Germany’s DAX (DE40) rose by 0.82%, France’s CAC 40 (FR40) closed up 0.17%, Spain’s IBEX 35 (ES35) added 1.10%, and the UK’s FTSE 100 (UK100) closed positive 0.21%.

Yesterday’s bullish factor for the European indices was the dovish comments of ECB Governing Council representative Villeroy de Galhau, who said that Eurozone inflation data for April gives the ECB confidence that it will start cutting interest rates in June. The Eurozone industrial production for March rose by 0.6% m/m, stronger than expectations of 0.4% m/m. The European Commission predicts the Eurozone GDP growth of 0.8% in 2024, unchanged from the February estimate, and downgrades the Eurozone inflation projection for 2024 to 2.5% from the February prognosis of 2.7%.

WTI crude oil prices rose above $79 a barrel on Thursday, extending gains from the previous session, as a larger-than-expected decline in weekly US crude inventories supported oil prices. EIA data showed that US crude oil inventories fell by 2.508 million barrels last week, declining for the second week and beating prognoses for a decline of 1.362 million barrels. In addition, weak US inflation data for April bolstered bets that the Federal Reserve will begin cutting interest rates in September, boosting the demand outlook. Meanwhile, the International Energy Agency cut its prognosis for global demand growth this year by 140,000 barrels daily to 1.1 million.

Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was up 0.08%, China’s FTSE China A50 (CHA50) decreased by 0.56%, Hong Kong’s Hang Seng (HK50) was not trading, while Australia’s ASX 200 (AU200) was positive 0.35%.

The flash data showed that Japan’s GDP contracted by 0.5% QoQ in Q1 2024, compared with market estimates of a 0.4% drop following a downwardly revised stagnation in the previous quarter. Private consumption, which accounts for more than half of the economy, contracted for the fourth consecutive quarter (-0.7% vs. -0.4% in Q4), worse than prognoses for a 0.2% decline and the sharpest drop in three quarters, as consumers continue to cut back amid high cost of living and low wages and in the aftermath of the Noto Peninsula earthquake earlier this year.

Australia’s seasonally adjusted unemployment rate stood at 4.1% in April 2024, compared to market prognoses and an upwardly revised 3.9% in the previous month. New data that the country’s wage growth unexpectedly slowed in the first quarter supported the RBA’s dovish outlook.

S&P 500 (US500) 5,308.15 +61.47 (+1.17%)

Dow Jones (US30) 39,908.00 +349.89 (+0.88%)

DAX (DE40) 18,869.36 +152.94 (+0.82%)

FTSE 100 (UK100) 8,445.80 +17.67 (+0.21%)

USD Index 104.32 −0.69 (−0.66%)

Important events today:

• – Japan GDP (q/q) at 02:50 (GMT+3);
• – Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
• – US Building Permits (m/m) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
• – US Industrial Production (m/m) at 16:15 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3);
• – US FOMC Member Mester Speaks at 18:30 (GMT+3);
• – US FOMC Member Bostic Speaks at 22:50 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.