Markets roar back, China trade too?

So much for ‘bad news is bad news’.

After struggling for days to take advantage of tumbling US bond yields, pushed lower by increasingly gloomy signals on the US growth outlook, Wall Street snapped back on Wednesday, surging over 1% and pushing the S&P 500 and Nasdaq to new highs.

Nvidia is a USD 3 trillion company, US futures are pointing to another rally at the open on Thursday and volatility is sinking. Bad news – and there was another dose of it on Wednesday in the form of soft private sector job growth – no longer seems to be bad news.

That’s the backdrop to the Asian open on Thursday, and it is worth highlighting because the drip feed of soft US economic data recently had begun to cast an increasingly dark shadow over markets and sour investor sentiment.

Throw in this week’s political and market volatility from the general elections in India, Mexico and South Africa, and the strength of Wednesday’s rally is perhaps doubly surprising.

That said, a much stronger-than-expected reading on Wednesday of US service sector activity in May can be seen as ‘good news’. But if equity investors seized on that, why did bond yields fall across the curve?

To be sure, the global interest rate picture is looking more risk-friendly. The Bank of Canada cut rates on Wednesday and the European Central Bank is expected to do so on Thursday.

The 2-year US Treasury yield has fallen more than 25 basis points in the last week, and is now down five days in a row – its longest stretch of down days this year. The 10-year yield is down 35 basis points in five days.

The Asian economy on Thursday sees the release of unemployment data from the Philippines, trade and housing market figures data from Australia, the latest reading of inflation from Taiwan, and Chinese trade data for May.

China’s trade data will be closely watched for signs that activity is picking up after months of disappointing numbers. Exports are seen rebounding strongly, rising 6.0% year-on-year, but import growth is expected to halve to 4.2%.

The combination of a powerful rally on Wall Street, falling volatility, lower bond yields and a fairly steady dollar should be a positive one for investors in Asia on Thursday.

Indian stocks jumped more than 3% on Wednesday, recovering half of Tuesday’s slump. The NSE Nifty 50 index and S&P BSE Sensex are now higher than they were on Friday, before the volatility sparked by the election exit polls and final results.

Japanese equities, meanwhile, look set to bounce back from two down days in row after the yen on Wednesday registered its biggest fall against the dollar in over a month.

Here are key developments that could provide more direction to markets on Thursday:

– China trade (May)

– Australia trade (April)

– Taiwan inflation (May)

(Reporting by Jamie McGeever; Editing by Josie Kao)

US dollar to weaken, but Fed rate cuts are required, say strategists

BENGALURU – The dollar’s relentless strength in the recent past will make way for minor weakness over the next 12 months, according to FX strategists in a Reuters poll, who generally agreed the dollar was overvalued.

Analysts have been predicting dollar weakness just around the corner for months. But the greenback has continued to extend its dominance against most major currencies, with the dollar index up 2.9% this year.

Much of that resilience is down to interest rates staying higher for longer. At the beginning of the year, forecasters and financial markets had predicted the US Federal Reserve would have cut rates at least once by now.

With the latest interest rates futures pricing showing the Fed would start easing policy in September, analysts in the May 31-June 4 poll of 75 forex strategists forecast the dollar to give up some its gains in coming months.

Much hinges on how US inflation – at 2.7% as measured by the Fed’s preferred gauge – progresses over the next couple of months.

A separate Reuters poll showed inflation averaging above the Fed’s 2.0% target at least until late 2025, suggesting the risk was the dollar would remain strong for an extended period.

“We think US inflation could be picking up again by the middle of the year and the Fed easing cycle could be really very short, almost irrespective of when it does commence,” said Jane Foley, head of FX strategy at Rabobank.

“That means even though the dollar will give back some ground, when the Fed starts to cut, the dollar is likely to remain relatively firm. It’s not going to give back an awful lot of this year’s gains and it’s going to remain overvalued.”

While nearly all major currencies have faced the wrath of a strong dollar, the Japanese yen JPY= was the only currency to weaken against the greenback every year since 2021. The currency has shed over a third during that period.

Median forecasts showed the yen rising nearly 8% from current levels to trade around 145.00/dollar in 12 months. The currency has lost around 10% for the year.

Meanwhile, the euro was forecast to change hands at USD 1.08 and USD 1.10 in six and 12 months, suggesting a gain of around 1% in a year from now.

“We’re expecting the dollar to generally lose ground against other currencies…once the Fed starts to cut, the dollar should be vulnerable and should give up some of its strength,” said Brian Rose, senior economist at UBS Global Wealth Management.

“We’re not looking for any kind of dollar collapse. We’re just talking about giving up a few percent against most major currencies.”

(Analysis by Purujit Arun; Polling by Rahul Trivedi, Susobhan Sarkar, and Sarupya Ganguly; Editing by Ross Finley and Alexandra Hudson)

10-year yields hit almost three-week low as job openings fall

Benchmark US Treasury yields fell to an almost three-week low on Tuesday after data showed that job openings fell more than expected in April, before highly anticipated jobs data on Friday may give fresh clues on Federal Reserve policy.

Job openings, a measure of labor demand, were down 296,000 to 8.059 million on the last day of April, the lowest level since February 2021.

The report “shows softening, or increasing balance, in the labor market, which is what the Fed wants to see and what the market wants to see,” said Vail Hartman, US rates strategist at BMO Capital Markets in New York.

Treasury yields have tumbled as investors bet that the US central bank will begin cutting rates as the economy cools.

This week’s main US economic release will be jobs data for May due on Friday, which is expected to show that employers added 185,000 jobs in May, according to economists polled by Reuters. It comes after April’s report showed that jobs growth slowed more than expected, with 175,000 jobs gains, the fewest in six months.

Traders are preparing for an even weaker jobs report than economists expect and “that’s kind of what’s feeding into some of this price action,” said Dan Mulholland, head of rates – trading and sales, at Crews & Associates in New York.

“You’ve seen a few cracks lately in terms of the economic data and what that translates into … more easing,” Mulholland said. “People are fearing missing out on the easing trade, they kind of want to be in front of it.”

Benchmark 10-year note yields fell 7 basis points to 4.332% and got as low as 4.314%, the lowest since May 16.

Two-year note yields fell 5 basis points to 4.773% and reached 4.749%, also the lowest since May 16.

The inversion in the two-year, 10-year yield curve deepened 2 basis points to minus 43 basis points.

Personal consumption expenditures (PCE) on Friday showing that US inflation tracked sideways in April and a report on Monday showing that US manufacturing slowed for a second straight month in May have added to the bond rally.

The drop in yields in response to Monday’s manufacturing data may indicate that there is “more sensitivity to the downside in yields,” said Zachary Griffiths, senior strategist at CreditSights in Charlotte, North Carolina.

“That’s been an indicator that’s been very negative for almost two years now,” Griffiths said, adding that there may be “fatigue to the idea that rates need to stay high or higher than they are right now.”

Data on Tuesday also showed that new orders for US-manufactured goods increased for a third straight month in April. Other releases this week will include the ADP National Employment report and service sector data for May, both due on Wednesday.

Next week’s consumer price index (CPI) for May will then be critical for guiding Fed expectations in the near term. It will come on Wednesday morning before the Fed is due to complete its two-day policy meeting, when Fed officials will update their economic and interest rate projections.

(Reporting by Karen Brettell; Editing by Will Dunham and Nick Zieminski)

Political, market volatility spice markets up

Investor sentiment is fragile as Asian markets reach the mid-point of the week, with bubbling angst and political volatility across the emerging world compounding deepening concern over US and global economic growth.

Indian assets, in particular, have been on a wild ride this week in response to the country’s general election result, a strong safety bid is driving the Japanese yen higher, and regional stocks are now down four out of the last five days.

That’s the backdrop to a jam-packed economic calendar across the region, which includes: Australian first-quarter GDP, revised GDP data from South Korea, service sector purchasing managers index data from Australia, China and India, as well as inflation from Thailand and the Philippines.

These indicators will go a long way to setting investors’ policy expectations for the region. Rate cut hopes are also likely to mount if the prospects for greater Fed easing continue to grow – almost 50 basis points of US rate cuts this year are now being priced in, up from around 30 bps last week.

The latest indicator to suggest the US economy is cooling was the ‘JOLTS’ report that showed job openings fell more than expected in April, pushing the number of available jobs per job-seeker to its lowest in nearly three years.

Wall Street ended mostly flat, despite Treasury yields falling for a fourth day. Equity bulls might argue that Wall Street has held up well in the face of renewed growth concerns, but riskier markets will need more than that.

What does Wednesday have in store for Indian markets? Stocks surged 3.4% to new highs on Monday after exit polls suggested Prime Minister Narendra Modi would extend his majority, but tumbled 5.7% on Tuesday as it became clear he would actually lose it.

Analysts at Barclays reckon market reverberations will be felt for a while yet, a premium will be put back into Indian bonds, and the central bank will maintain its presence in the FX market to limit volatility and weakness in the rupee.

Volatility in the yen is also picking up, with short-term implied volatility in dollar/yen on Wednesday jumping the most in a month as the dollar tumbled below 155.00 yen.

If there is a safe-haven bid in FX right now, it looks to be going to the yen, which has the potential support of the world’s largest repatriation flow.

Japan is the world’s largest creditor with a net USD 3.36 trillion invested overseas, more than half of that in equity and debt portfolio assets. Even a sliver of that brought back home can lift the yen.

Here are key developments that could provide more direction to markets on Wednesday:

– Australia GDP (Q1)

– Indian market volatility

– China, India, Australia services PMIs (May)

(Reporting by Jamie McGeever)

Gold dips as dollar steadies, focus turns to US jobs data

Gold fell more than 1% on Tuesday as the dollar steadied ahead of US jobs data, due later this week, which could set the tone for the Federal Reserve’s interest rate strategy.

Spot gold fell 0.9% to USD 2,329.10 per ounce by 1818 GMT.

US gold futures settled 0.9% lower at USD 2,347.4 per ounce.

Gold reversed gains from a bounce late in the previous session following weaker US manufacturing data. The latest fall in the safe-haven asset also came despite a dip in Wall Street.

“There was probably a bit of a reaction to the US dollar,” and an element of profit-taking in gold, said Bart Melek, head of commodity strategies at TD Securities.

The dollar index steadied making gold more expensive for overseas buyers, after falling to its lowest since mid-April overnight. USD/

Investors now await Friday’s US non-farm payrolls data for clarity on rate cuts. Lower rates reduce the opportunity cost of holding non-yielding bullion.

Weaker jobs data might prompt a short-term rally in gold, while a stronger number will pressure gold since it may suggest the Fed is going to have a “more difficult time” cutting rates, said Jim Wyckoff, senior analyst at Kitco Metals.

Overall, “gold is likely to grind sideways, if not sideways to slightly lower here in the coming few weeks, barring an unexpected geopolitical event that would drive safe haven demand.”

Additionally, investors kept an eye on results from elections in India, the world’s second-biggest gold consumer.

“If equities continue to crash, there will be some funds going into gold as well,” said ANZ commodity strategist Soni Kumari.

Overall declines in commodities, led by oil, may also be contributing to the bearish sentiment in precious metals, analysts said.

Silver fell 3.8% to USD 29.59 per ounce, platinum shed 1.6% at USD 995.50 per ounce and palladium lost 0.1% to USD 916.50 per ounce.

(Reporting by Rahul Paswan in Bengaluru; Editing by Shreya Biswas and Maju Samuel)

Oil drops as OPEC+ boosts supply even though demand is shaky

HOUSTON – Oil prices fell more than USD 1 a barrel on Tuesday on skepticism about an OPEC+ decision to boost supply later this year into a global market where demand has already shown signs of weakness.

Extending losses from a four-month low reached on Monday, Brent crude futures settled down 84 cents, or 1.07%, at USD 77.52 a barrel. Brent’s closing price on Monday was below USD 80 for the first time since Feb. 7 after falling more than 3%.

At its lowest on Tuesday, Brent traded at USD 76.76, less than USD 2 shy of this year’s nadir of USD 74.79 at the beginning of January.

US West Texas Intermediate crude futures finished down 97 cents, or 1.31%, at USD 73.25. WTI had fallen by 3.6% on Monday to settle near a four-month low.

The Organization of the Petroleum Exporting Countries and allies led by Russia, together known as OPEC+, agreed on Sunday to extend most of their oil output cuts into 2025 but left room for voluntary cuts from eight members to be unwound gradually, beginning in October.

“My base case is that the market is overreacting to the OPEC announcement,” said Phil Flynn with Price Futures Group.

The planned October unwinding adds jitters about oversupply in an environment where traders are already spooked about high interest rates hampering global economic activity. A steady flow of dim signals from major economies such as the US, China, and Europe suggest that their appetite for oil may not be as healthy as hoped through the rest of the year.

“If we do see a significant drop in oil prices, then you will have to question the soundness of the global economy,” Flynn said. “Then it will look like the Federal Reserve has done too much.”

On top of this, supply is rising from non-OPEC producers such as the US

Meanwhile, on the demand side in the world’s top oil consumer, weekly US oil data will show how much gasoline was consumed around last week’s Memorial Day weekend, the start to the US summer driving season.

The American Petroleum Institute will release inventory data on Tuesday afternoon. The US government will release inventory and product-supplied data on Wednesday.

(Reporting by Erwin Seba in Houston; additional reporting by Paul Carsten in London, Arathy Somasekhar in Houston, and Trixie Yap in Singapore; Editing by Marguerita Choy, Jason Neely, David Goodman, and Lisa Shumaker)

Wall Street stocks end slightly higher as weak jobs data supports rate cut

NEW YORK – US stocks ended a shade higher on Tuesday following softer-than-expected labor market data that reaffirmed expectations of an interest rate cut by the Federal Reserve.

Data on Tuesday showed that US job openings fell to their lowest level in more than three years in April, signaling an easing in labor market tightness that supported a Fed rate cut this year. The US Treasury yields slipped following the report.

Wall Street’s main indexes gained ground after paring earlier losses. Equities in real estate and consumer staples sectors advanced ahead of others, while materials and energy stocks were the biggest losers.

The labor market data was the latest in a string of recent reports that pointed to cooling US economic growth. Data on Monday showed that US manufacturing activity had slowed for the second straight month in May.

“What we’ve seen in the data so far this week is that it’s been relatively weak, starting with manufacturing PMI and job openings today,” said James St. Aubin, chief investment officer at Sierra Mutual Funds in Santa Monica, California.

“That has had a total effect of helping the rally in the bond market; but for the stock market, it’s a double-edged sword because they’re looking for a rate cut announcement, which has a rising probability with weaker data,” St. Aubin added.

Market expectations for a September rate reduction now stand around 65%, versus below 50% last week, according to the CME’s FedWatch tool. The closely watched non-farm payrolls data for May is due on Friday.

The Dow Jones Industrial Average rose 140.26 points, or 0.36%, to 38,711.29, the S&P 500 gained 7.94 points, or 0.15%, to 5,291.34 and the Nasdaq Composite gained 28.38 points, or 0.17%, to 16,857.05.

Megacap technology stocks, including Amazon.com, Alphabet, Nvidia, and Microsoft, ended higher after losing ground early in the session.

Oil giants Exxon Mobil and Chevron fell 1.6% and 0.8%, respectively, as demand concerns weighed on crude prices.

Bath & Body Works slumped 12.8% after a lower revision to its quarterly profit forecast. Axos Financial dropped after Hindenburg Research disclosed a short position in the lender.

Paramount Global fell 4.4% after the media conglomerate said it was exploring strategic options or a joint venture for its Paramount+ streaming service.

Declining issues outnumbered advancers by a 1.32-to-1 ratio on the NYSE. On the Nasdaq, 1,468 stocks rose and 2,762 fell as declining issues outnumbered advancers by a 1.88-to-1 ratio.

The S&P 500 posted 19 new 52-week highs and 6 new lows while the Nasdaq Composite recorded 40 new highs and 134 new lows.

Total volume of shares traded across US exchanges was about 10.6 billion, compared with the 12.6 billion average over the last 20 trading days.

(Reporting by Chibuike Oguh in New York; additional reporting by Lisa Mattackal and Johann M Cherian in Bengaluru; Editing by Pooja Desai and Matthew Lewis)

Nvidia leads global market cap gainers in May with AI-driven rally

Nvidia led global companies in market cap gains in May, buoyed by a stunning rally as its bumper revenue forecast reinforced investor confidence in the AI-driven surge in chip demand.

Nvidia’s market cap soared to USD 2.69 trillion at the end of May, marking a nearly 25% increase during the month, as the announcement of its stock split further boosted investor enthusiasm.

Microsoft maintained its position as the leading global company by market cap, rising 6.6% to USD 3.08 trillion in May, with shares touching record highs driven by expectations that AI will significantly boost profit growth for Microsoft and its major competitors.

Those expectations were further bolstered as the company introduced a new category of personal computers with AI features, called ‘Copilot+’ PCs, capable of handling more artificial intelligence tasks without relying on cloud data centers.

Apple remained the second-largest company by market cap, surging 12.9% to USD 2.94 trillion at the end of May, fueled by AI optimism, and increased smartphone shipments to China. Brokerage BofA Global Research noted that artificial intelligence is driving a shift from smartphones to “IntelliPhones” — AI-powered smartphones — and projected that Apple would benefit from a multi-year upgrade cycle driven by AI.

Walmart Inc. WMT experienced significant growth, with its market cap rising 10.8% to USD 530 billion at the end of last month, as the company reported better-than-expected quarterly results and raised its full-year forecast, anticipating that easing inflation will boost sales of groceries and non-essential merchandise such as clothing and electronics.

Meanwhile, Tesla’s market cap dropped nearly 3% to USD 567.9 billion, affected by a decline in its sales in Europe, slowing growth in electric vehicle demand, and tough competition impacting the demand for Tesla’s vehicles.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Christina Fincher)

Yields hit two-week low after soft manufacturing data

Benchmark US Treasury yields fell to a two-week low on Monday after data showed that US manufacturing activity slowed for a second straight month in May, boosting expectations that a softening economy may allow the Federal Reserve to cut interest rates later this year.

Manufacturing weakened as new goods orders dropped by the most in nearly two years, while a measure of input inflation fell back from the highest since mid-2022.

US construction spending also fell unexpectedly for a second consecutive month in April on declines in non-residential activity.

“On the one hand, this (manufacturing data) is another survey that seems to show pessimism and weaker economic activity. On the other hand, these surveys aren’t as reliable as they used to be,” said Will Compernolle, macro strategist at FHN Financial in New York.

Compernolle noted that the data “comes on the back of slower personal spending that we saw last Friday and a host of other things that people are looking to for weaker economic activity.”

Traders are gauging when the Fed is likely to begin cutting interest rates as inflation remains above its 2% annual target.

Friday’s personal consumption expenditures (PCE) price index for April showed that price pressures stabilized in the month while consumer spending slowed, boosting bets that the Fed could cut rates as soon as September.

Benchmark 10-year note yields fell 11 basis points to 4.402%, and got as low as 4.392%, the lowest since May 17.

Two-year note yields fell 8 basis points to 4.818% and reached 4.814%, the lowest since May 20.

The inversion in the two-year, 10-year yield curve deepened 4 basis points to minus 42 basis points.

This week’s main US economic release will be jobs data for May due on Friday, with May’s consumer price inflation report on June 12 the next major focus.

Other jobs data this week will include the Job Openings and Labor Turnover Survey (JOLTS) report for April on Tuesday and the ADP National Employment report for May on Wednesday.

Next week’s inflation data will be critical for setting Fed expectations, and investors will be looking for further signs that inflation is easing following higher-than-expected readings in the first quarter.

The Fed will also update its economic and interest rate projections when it concludes its two-day meeting on June 12.

(Reporting by Karen Brettell; Editing by Tomasz Janowski and Will Dunham)

Oil hits four-month low as OPEC+ decision fails to allay demand worries

NEW YORK – Oil prices tumbled by USD 3 a barrel on Monday to their lowest in nearly four months, as investors worried that a complicated OPEC+ output decision could lead to higher supplies later in the year even though demand growth has been slow.

Brent crude futures fell by USD 2.75, or 3.4%, to settle at USD 78.36 a barrel, closing below USD 80 for the first time since Feb. 7. US West Texas Intermediate crude futures also closed at a near four-month low of USD 74.22 a barrel, down by USD 2.77 or 3.6% from Friday.

Both contracts were down by USD 3 a barrel in post-settlement trading.

OPEC+ on Sunday agreed to extend most of its oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound from October onward.

Analysts at Goldman Sachs said the outcome was negative for oil prices as the phasing out of voluntary cuts shows a strong desire by several OPEC+ members to bring back output despite recent increases in global oil stocks.

“The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations,” Goldman Sachs analysts said.

Other analysts also called the group’s decision incrementally bearish for oil prices in light of high interest rates and rising output from non-OPEC producers like the United States.

“Ultimately, a combination of factors has come into play,” independent oil analyst Gaurav Sharma said, highlighting disappointing economic indicators in the United States and China.

“When OPEC+ took the decision it did over the weekend, in a reasonably well-supplied crude market, traders factored in the macro picture alongside a dwindling risk premium (with talk of a ceasefire in Gaza) and went net short,” Sharma said.

An aide to the Israeli prime minister confirmed on Sunday that Israel had accepted a framework deal for winding down the Gaza war, although the Israeli side called it a flawed deal.

Signs of weakening demand growth have also weighed on oil prices in recent months, with data on US fuel consumption in focus.

The US government will release estimates of oil stocks and demand on Wednesday, which will show how much gasoline was consumed around the Memorial Day weekend, the start to the US driving season.

“The hard numbers are that the market is well-supplied,” said John Kilduff, partner at Again Capital.

“If we do not get a spectacular number on Memorial Day in the US, that’s going to be game over,” Kilduff added.

US gasoline futures RBc1 fell more than 3% on Monday to a more than three-month low of USD 2.34 a gallon.

US efforts to replenish the country’s Strategic Petroleum Reserve (SPR) could provide some support for oil prices. The United States is buying another 3 million barrels for the SPR at an average price of USD 77.69 a barrel, the US Department of Energy said on Monday.

(Reporting by Shariq Khan in New York, Natalie Grover in London, Mohi Narayan in New Delhi, and Emily Chow in Singapore; Editing by David Goodman, Kirsten Donovan, Sriraj Kalluvila, David Gregorio, Will Dunham, and Deepa Babington)

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