US stock markets closed lower as investors digested in-line inflation data and weighed political uncertainty after the first presidential debate between Joe Biden and Donald Trump. The Dow Jones Index dropped 1.7%, highlighting the divergence between the more tech-heavy indexes and the rest of the market. Data showed that US monthly inflation was unchanged in May, which was seen as an encouraging development after strong price increases earlier this year raised doubts over the effectiveness of the Federal Reserve's monetary policy. Bets on a rate cut in September rose to 66% after the release of the personal consumption expenditures price index. The debate between Biden and Trump also had an impact on stocks. Nike slumped 19.98% after forecasting a surprise drop in fiscal 2025 revenue. Nike experienced its steepest one-day decline in over two decades. The Federal Reserve remains disciplined in its 2% inflation target. Consumer spending rose marginally, fueling optimism for a 'soft landing' for the economy. Treasury yields ended higher, adding pressure on some megacap stocks. The S&P 500 lost 0.43% to end at 5,460.70 points, the Nasdaq Composite lost 0.73% to 17,728.68, and the Dow Jones Industrial Average fell 0.14% to 39,109.95. The FTSE Russell finalized the reconstitution of its indexes. Infinera jumped after Nokia announced its acquisition of the company in a $2.3 billion deal. US inflation fell to a three-year low in May, paving the way for an interest rate cut in September [c771b0bf].
Global stock markets ended the first half of the year on a low note due to tepid economic data and the fallout from the chaotic first US presidential debate. Investors are re-evaluating their portfolios to align with economic policies that a potential Trump administration might pursue, including lower corporate taxes and significant deregulation efforts. Tougher trade relations with China may introduce short-term volatility but could lead to stronger domestic industries and a more resilient US economy. The Federal Reserve has downgraded its rate-cut expectations for 2024, projecting a lower interest rate of 5.1% for the year. Technology stocks, which have powered the stock market's run in 2024, were among the biggest losers. London's FTSE 100 finished 0.2% lower, and Paris's CAC 40 retreated 0.7% ahead of France's first round of legislative polls. Oil prices pulled back amid hopes of US interest rate cuts that will stimulate the economy and boost crude demand. Gold rose, boosted by the US inflation report raising hopes of an interest rate cut.
US shares were down 0.1% as profit-taking in tech stocks and rising election uncertainty after the presidential debate weighed on the market. Economic data and news of lower inflation remained supportive of the Federal Reserve cutting rates this year. Japanese shares rose 2.6% for the week, while Eurozone shares fell 0.6% ahead of the French parliamentary elections. Chinese shares fell 1%. Australian shares fell 0.4% due to higher inflation and fears of another interest rate hike. IT and energy shares were up sharply, but retail and property shares were down. Bond yields mostly rose. Oil and metal prices fell, but the iron ore price rose slightly. The Australian dollar and the US dollar both rose, with the US dollar mainly gaining against the yen. Despite a soft week, the past financial year saw strong investment returns. US shares returned around 25%, global shares around 21%, and Australian shares around 12%. Cash returned around 4.5% and bonds returned around 2-3%. Unlisted commercial property remained negative. The strength in shares was driven by lower interest rate expectations, stronger economic activity and profits, particularly in the US. Australian shares performed well but were relative laggards due to ongoing China worries and concerns about the impact of rate hikes on households. The coming financial year is expected to have more constrained and volatile returns, reflecting poor valuations, elevated investor sentiment, overbought conditions, and high geopolitical risks around France and the US. The PredictIt betting market now gives a 57% probability of Trump winning versus Biden's 35% [47927d8b].
Global stocks edged higher on Monday amidst volatile trading, influenced by France's historic elections and upcoming U.S. economic data. European and U.S. markets showed gains despite uncertainties, with notable movements in currencies and commodities. Investors anticipate insights from key financial figures and reports due later this week. The French far right took a smaller-than-expected lead in the first round of voting, suggesting a hung parliament could result and hamper the party's agenda. Benchmark 10-year Treasury yields rose to their highest since mid-June. On Wall Street, all three major indexes finished higher in a choppy session led by gains in technology, consumer discretionary, and financial stocks. Oil prices rose 2% to a two-month high on hopes of rising demand during the Northern Hemisphere's summer driving season and worries that conflict in the Middle East could spread and reduce global oil supplies. The dollar surged to a fresh 38-year peak against the yen. Gold prices edged higher.
Asian stocks fluctuated amid US election uncertainty. Markets in Japan, Australia, and South Korea remained stable. Yields on 10-year Treasuries held steady. Wall Street edged higher with tech megacaps leading the rally. The Democratic National Committee considers early Biden nomination. Supreme Court ruling on Trump's immunity affects the election. Fiscal deficit policies are investors' focus. Investors are now looking toward the election as an even bigger potential given that it currently appears Trump’s chances of retaking the White House have meaningfully improved. In China, pessimism about the domestic economy has sparked a surge in demand for government bonds. The central bank said it will borrow government bonds from primary dealers, a sign it may be contemplating selling securities to cool down the rally. Meanwhile, the prospect of a Bank of Japan interest rate hike coming later this month increased after an index showed confidence among the nation’s large manufacturers rose from three months earlier. In Europe, ECB President Christine Lagarde signaled that there is not sufficient evidence that inflation threats have passed, feeding expectations that officials will take a break from cutting interest rates this month.
Signs of a cooling US economy with slowing growth and political concerns. The Institute for Supply Management's June survey showed US manufacturing contracted for a third straight month. The US economic surprise index is registering its most negative reading in almost two years. The Atlanta Fed's 'GDPNow' tracker has ebbed to just 1.7%. President Joe Biden's poor showing in last week's presidential TV debate and the US Supreme Court ruling on Trump's partial immunity from prosecution have cut the odds on a Trump victory in November. Bond markets are unsteady, with 10-year Treasury yields hitting their highest in a month and the inverted yield curve spread from 2 years to 10 years narrowing to the lowest since early May. The 2-to-30 year yield curve is at its least inverted in almost five months. French stocks gave back about half of Monday's gains earlier and the French-German 10-year yield premium edged back up to 75 basis points from 72 bps early on Monday. Eurozone inflation eased last month but a crucial services component remained stubbornly high. The euro slipped back from two-week highs to about 1.0710 on Tuesday. The dollar was firmer in general, eking out another 38-year high against Japan's yen at 161.74. Stock markets around the world were lower, including in China after a mixed bag of corporate surveys this week. Japan's Nikkei bucked the trend on the back of the weak yen, gaining more than 1% and hitting the 40,000 level for the first time in three months on Tuesday. Wall St stock futures were down 0.4% ahead of the bell, and Treasury ticked back lower ahead of Tuesday's open. The Dow is slightly down today as Federal Reserve Chairman Jerome Powell states that the disinflationary trend is resuming. The market is closely watching Powell's comments. [57f4726b]