The AI boosted rally in the US tech sector helped the markets gain momentum last week, while the upcoming decision by the Fed on the cash rate takes center stage this week.
United States
The US markets rose due to the euphoria in the technology sector last week. Traders are now focusing their attention on the Fed’s upcoming interest rate decision forecast to remain at 5.25%, following the BoC and Australia’s surprise hike in interest rates last week. Evercore ISI’s Vice Chairman, Krishna Guha commented, “The Fed is the price-setter here, the others are the price-takers, and we should not confuse the two.” Economic data out of Canada revealed unemployment rate rose from 5% in April to 5.2% in May. The number of unemployed individuals rose by -17.3K, missing forecasts of a rise in employment to 23.2k. In the coming week, investors will look for signs of relief in the upcoming inflation rate on Tuesday and the PPI report on Wednesday.
The S&P 500 closed slightly higher on Friday, up by 0.11%. Information technology rose by 0.46%, consumer discretionary edged up 0.44% and healthcare firmed 0.19%. The materials sector was the biggest laggard, declining by -0.82%, while energy and utilities retreated by -0.58% each. The Dow gained 0.13%, the Nasdaq rose by 0.11% while the Russell 2000 Index slid by -0.80%. The yield on the 2-Year treasury bond rose by 7 basis points to 4.59%. The yield on the 10-Year treasury bond was up by 2 basis points to $3.74, while the yield on the 30-Year bond fell by 1 basis point to 3.88%. Meanwhile the VIX Index jumped 1.32% to 13.83.
Europe
In Europe, markets receded closing lower at the end of trading on Friday. The Euro STOXX 600 closed -0.28% lower, with six out of the eleven sectors closing in the red. Materials was the biggest laggard, falling by -1.03%, financials declined by -0.49% and healthcare receded -0.44%. Real estate was the star performer, rising up 0.90%, while utilities added 0.60% and information technology firmed 0.16%. The CAC slid -0.12%, the DAX receded -0.25% while the FTSE was down by -0.49%.
The ECB will take center stage when it announces its decision on the interest rate, which economists forecast to rise by a quarter of a percentage point, from 3.75% to 4%. Also in the week, the release of fresh data including the EuroZone’s ZEW Economic Sentiment Index for June and the core inflation rate for May. The United Kingdom is expected to release the national unemployment rate and GDP for April, while Germany will release the country’s inflation rate for May.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX 200 index closed 0.32% higher at 7122, despite 54% of the index closing in the red. The index was boosted by the information technology sector jumping 1.63%, materials gaining 1%, and consumer discretionary firming 0.56%. Utilities fell by -0.42%, industrials receded by -0.33% and the energy sector slid by -0.26%. In technology, WiseTech climbed 2.6%, Xero jumped 2.7%, and Albium gained 1.4%. In mining, Fortescue Metals was up by 1.4%, while BHP firmed 1.3%. In consumer discretionary, IDP rallied 3%, Aristocrat Leisure was up by 1.5%, Lottery Corporate added 1.4%, while WesFarmers gained 0.3%. In Banking, ANZ was the best performer gaining 0.8%, Westpac added 0.3%, NAB firmed 0.2%, while Commonwealth Bank receded 0.1%. This week, investors will be keen on the Fed’s decision on the interest rate, along with the Australian unemployment rate for May. The ASX will remain closed on Monday on account of a public holiday.
In other news, data out of China showed the country’s year-on-year inflation rate for May rose by 0.2%, less than forecasts of 0.3%. PPI rose from -3.6% in April to -4.6% in May, higher than forecasted -4.3%.
Commodities
In commodities, signs of a slowdown in China led to a decline in oil prices. WTI and Brent Crude oil prices slumped by -1.57% and -1.54% to $70.17 and $74.79 respectively. In precious metals, the price of spot gold fell by -0.22% to $1,961 while the price of spot silver rose by 0.23% to $24.29. In industrial metals, the price of copper slid -0.16% to $379, the price of nickel was up by 0.10% to $21,051, and SGX Iron Ore jumped 2.09% to $112.59.
Economic Calendar
12th June 2023
New Zealand Electronic Retail Card Spending 08:45
JPN PPI (YoY May) 09:50
CHN New Yuan Loans (May) 18:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
