United States
US stocks experienced modest movement overnight, with the S&P 500 holding close to its all-time high, as investors grappled with the ongoing economic and geopolitical uncertainties. The Nasdaq 100 saw a 0.2% gain, boosted by Nvidia, which reached a new record high after a 4.3% surge driven by renewed optimism around artificial intelligence. Meanwhile, smaller-cap stocks underperformed, with the Russell 2000 falling 1.2%, highlighting the cautious sentiment in broader market conditions. On the bond front, the yield curve steepened further, signalling that investors expect interest rate cuts in the future, especially with the uncertainties surrounding trade policies and economic growth. The focus tonight is the third and final reading of Q1 GDP, which is expected to show that the economy contracted at a -0.2% annualised rate.
Federal Reserve Chairman Jerome Powell testified before Congress, confirming that the Fed remains in a “wait-and-see” mode, hesitant to cut rates due to the uncertainties created by tariffs and inflation. Powell’s stance contrasts with some Fed officials who have suggested that the central bank could move toward easing sooner than expected. Despite these concerns, JPMorgan strategists remain optimistic about the prospects for the US stock market, forecasting new highs due to strong consumer demand and continued growth in the artificial intelligence space. However, warnings are coming from Goldman Sachs and Piper Sandler, who caution that the recent rally in stocks may be overextended, especially given the elevated valuations in the tech sector.
Geopolitical tensions continued to weigh on market sentiment, with President Trump confirming a meeting with Iran, though casting doubt on the possibility of a formal diplomatic resolution. Meanwhile, a fragile ceasefire between Israel and Iran helped ease some of the immediate geopolitical risk concerns, bringing some relief to the energy markets.
Europe
European stocks followed global trends, with the Euro Stoxx 600 falling 0.7%, primarily driven by concerns surrounding the US-EU tariff dispute. Spain’s IBEX 35 took the brunt of the sell-off, dropping 1.6%, the largest decline since April, after President Trump suggested that Spain could face higher tariffs, further exacerbating the ongoing trade tensions between the US and the European Union. The Euro Stoxx 600 saw broad-based declines, although some sectors managed to find support. The auto sector outperformed, bolstered by a 1.9% rise in European car registrations for the month. On the other hand, Continental dropped 2.94%, issuing a profit warning and citing the negative effects of currency fluctuations and increasing trade barriers on its business.
In corporate news, US listed BP shares surged up to 10% before finishing just 1.64% higher following reports that Shell is considering acquiring BP in what could become the largest oil deal in decades. However, Shell shares fell by 4% after the news, highlighting the uncertainty around the potential deal. The euro and pound gained 0.4% against the US dollar, which weakened amid ongoing geopolitical risks and economic uncertainty. German bond yields rose slightly, with the 10-year yield increasing by 3 basis points to 2.54%, while UK 10-year yields saw a slight decrease of 2 basis points, settling at 4.47%.
Australia
The Australian stock market is set to open lower, with ASX 200 futures down 37 points (-0.4%), reflecting the mixed performance of global equities. The ASX 200 finished relatively flat on Wednesday, with a modest gain of just 3.7 points, following a day of volatility. The market’s performance was driven by hopes for an interest rate cut from the Reserve Bank of Australia (RBA), after core inflation unexpectedly fell to 2.4%, the lowest level since November 2021. This unexpected drop in inflation has fueled expectations that the RBA may cut rates as soon as next month, with economists forecasting a rate cut in July. The banking sector led the market higher, with CBA reaching a fresh record high, closing up 1.7%, and ANZ gaining 1.8%. In contrast, the mining sector faced headwinds, as Fortescue dropped 2.3%, BHP fell 1.5%, and Rio Tinto lost 1%. Investors in the energy sector also took profits, with Woodside falling 6.5% and Santos declining 1.2%.
Meanwhile, Virgin Australia surged 3.4% on its first day of trading after a partial sell-down by its private equity owner, Bain Capital. Greatland Gold also gained 10.6% in its debut but faced a slight pullback of 1.4% after the initial surge. Macquarie Bank saw strong gains, up 2.42%, and ANZ was underperforming, as analysts downgraded it to a “sell” amid concerns over leadership changes. Xero remained in a trading halt following news of its acquisition of New York-based Melio Payments for $3.9 billion.
The outlook for the Australian market remains cautious, as the market grapples with ongoing geopolitical risks and economic uncertainty. Rate cut expectations have provided some support for sectors like banking, but the broader market remains volatile due to concerns about global economic growth and trade tensions. Today’s release of May job vacancies will be closely watched for further clues on the health of the labour market and the likelihood of a rate cut by the Reserve Bank of Australia in the coming months.
Commodities
Oil prices rebounded slightly, with Brent crude rising by 0.8% to US$67.68 and WTI crude gaining 1.3% to US$65.22, following a significant drop in the previous sessions. The reversal in oil prices comes as the market shifts focus away from geopolitical risk and toward supply-side developments, including increased output from Kazakhstan’s state energy company. Gold showed a modest recovery, up 0.3% to US$3333.87, though earlier in the session, it had fallen by more than 2%. The weakening of the US dollar provided some support for gold, while silver also saw a slight decline, trading at US$35.92.
Iron ore prices remained under pressure, falling by 0.3% to US$92.70, with concerns over Chinese industrial demand contributing to the price drop. Other commodities saw mixed performance, with copper holding steady at US$9,669 per tonne, while Bitcoin surged by 1.5%, reaching US$107,778, continuing its volatile trend. Bitcoin’s gains were offset by a drop in Ether, which fell by 0.7%, trading at US$2,432.97. The US dollar remained weak, continuing its retreat after hitting a three-year low, and pushing the euro and pound higher. Bond yields in the US and Australia were lower, with the US 10-year yield at 4.28% and the Australian 10-year yield at 4.12%.
Economic Calendar
AU:
- Job Vacancies (May) – 11.30
US:
- GDP (QoQ Q1) 22:30
- Retail Inventories (May) 22:30
This article was written by Paul Darwell, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
