Morning report

When Will Bad News Become Bad News Again?

Global markets continued to move mostly higher as another release of weak economic data put downward pressure on bond yields. This bad news was all the good news equities needed to keep benchmarks around their all-time highs. However, the market's response suggests the risks between inflation and economic weakness are becoming more balanced. Nvidia again joined the party as it dethroned tech heavyweight Microsoft as the world's most valuable company.

US equities still gain as markets grapple with whether bad news is still good news

US stocks advanced again on Tuesday and US Treasury yields fell after a softer-than-expected report on consumer spending, while investors digested comments from Federal Reserve officials on interest rates. The initial reaction to the weak consumer spending data from stocks actually pointed slightly higher, but reversed within minutes as Wall Street continued to wrestle with whether bad news is good news, or if it's truly bad news. The retail sales report extended a trend of relatively soft economic data that has some investors worried about an economic slowdown. Weak data would tend to argue in favor of nearer-term rate cuts. The market's opaque response might reflect the risks between inflation and possible economic weakness becoming more balanced. The S&P 500 gained +0.2%, while both the NASDAQ and the DOW traded broadly flat on light volumes ahead of Juneteenth holiday on 19 June. US Treasury yields ​​​​​​​moved lower in response to the weak retail sales print, with the 2 year down -5 bps to 4.706% and the 10 year ​​​​​​​-6 bps to 4.219%. Nvidia​​​​​​​'s +3.7% gain saw it surpass Microsoft (-0.5%) as the world's largest stock by market cap, as its chips continue to play a central role in a race to dominate the market for artificial intelligence.

Europe continues to rebound

European equities' rebound from last week's weakness continued, with the broad STOXX 600 benchmark shifting up +0.7%. This was supported by France's CAC 40 moving +0.8% higher and Italy's FTSE MIB jumping +1.2%, while Germany's DAX contributed +0.4%. The FTSE 100 also moved +0.6% higher, led by the UK's largest broker Hargreaves Lansdown (+5.3%) as it announced it is poised to accept a private equity buyout offer, after rejecting the previous bid last month from the same PE consortium.

Asian benchmarks also move higher, Australia and NZ join global rally

Most major Asian stock indices moved higher on Tuesday, save for the Hang Seng which fell a mere -0.1%. The Shanghai Composite gained +0.5%, the Bombay SE increased +0.4%, the Nikkei 225 leapt +1.0%, and the Kospi ​​​​​​​gained +0.7%. Australia joined the party, with the ASX 200 jumping +1.0% as the RBA elected to keep rates on hold as expected, while our local NZX 50 ​​​​​​​shifted +0.6% higher as infrastructure investor Infratil surged +3.9%, emerging from a trading halt after successfully completing a NZ$1b capital raise to institutional investors on Monday. Investors evidently are satisfied with the strategy of fuelling growth of its CDC data centre business, latching onto the AI theme.

Oil prices settle around recent highs, as commodities generally gain

WTI Crude settled around its six-week high, gaining +1.4% to US$81.50/bbl while Gold inched +0.5% higher to US$2,330.19/oz. Iron ore prices shifted slightly lower (-0.1%) as it continued recent weakness, down to US$107.05/MT.


 

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This morning summary has been provided by Forsyth Barr Ltd and is for general information purposes only - your financial situation or goals have not been taken into account. If you would like more information or advice that is specific to you, talk to your financial adviser.