The strongest to the weakest of the major currencies
The AUD is the strongest and the USD is the weakest as the North American session begins. Needless to say, traders are keenly awaiting the Federal Reserve’s decision on interest rates which will take place at 2 PM ET with a press conference from Fed Chair Powell at 2:30 PM ET. The expectation is that the central bank will “skip” its rate-hiking cycle in light of the recent data that yesterday showed a slowing down of inflation growth, which declined to 4.0%. However, as this figure is still above the Fed’s target and the labor market is showing signs of strength, the pause, if it happens, could be temporary. The expectations are for a 91% chance of a “skip” but the expectations for July are still pointing to a 25 basis point hike.
U.S. stock futures are mixed in premarket trading. While the Dow futures have seen a slight drop, S&P 500 and Nasdaq indices are higher. Tesla shares are up in premarket trading as it works on its 14 consecutive up days. The company’s recent run has added $240 billion in market value. The stock is trading at $263.79 in premarket U.S. trading. This follows a 3.55% gain in the previous session, closing at $258.71. So far in 2023, Tesla’s shares have more than doubled, marking a growth of just over 139% year-to-date. Meanwhile, Nvidia, market capitalization closed above $1 trillion for the first time. This achievement – along with Tesla – has been driven primarily by the increasing interest and developments in artificial intelligence, a sector where Nvidia’s graphics cards see high demand. Nvidia joins Amazon, Apple, and Microsoft in the trillion-dollar club. Nvidia shares are trading at $410.84 in premarket trading after closing at $410.22 yesterday
In other significant stock news, the proposed $69 billion merger between Microsoft and Activision Blizzard has been temporarily halted by a California federal court based on a request from U.S. antitrust regulators. An upcoming hearing next week will determine whether this preliminary injunction is warranted. Both Microsoft and Activision Blizzard are required to submit their legal arguments against the injunction by Friday.
In the oil sector, Shell has announced plans to increase its dividend and reduce spending to regain investor confidence. The company has proposed raising shareholder distributions to between 30% and 40% of its cash flow from operations. Additionally, Shell plans to increase its dividend by 15% from Q2, and boost the rate of share buybacks to at least $5B for the second half of 2023. They will also reduce capital expenditures for 2024 and 2025. Shell is expected to present these plans at an investor conference in New York later today. The trend in oil sector has been to move from investment and into paying back shareholders that has a bias to weaken supply. Demand is the other side of the equation, and concerns about growth worry traders. Oil prices are back above $70 today (up $0.77 on the day). The EIA will release inventory data at 10:30 AM ET. The inventory data from the private source released yesterday showed increases across all categories. Crude oil inventories increased by 1.024 million barrels (expect -0.510M), while Cushing inventories saw a rise of 1.502 million barrels. Gasoline inventories experienced a surge of 2.075 million barrels (exp 0.316M), and distillates also increased, adding 1.394 million barrels (est. 1.208M).
The economic data released in Europe today suggests mixed trends in the region’s economy.
In Germany, the Wholesale Price Index (WPI) declined by 1.1% month-on-month (m/m), a sharper drop than the 0.1% decline forecasted, and significantly lower than the previous month’s decline of 0.4%.
In the UK, there were several data releases:
- The monthly GDP growth rate was 0.2%, meeting the forecast and showing an improvement from the previous month’s decline of 0.3%.
- The Construction Output m/m fell by 0.6%, which was worse than the predicted 0.0% change and also lower than the previous month’s growth of 0.2%.
- The Goods Trade Balance was reported to be -£15.0 billion, showing an improvement over the expected -£16.5 billion and the prior -£16.4 billion.
- The Index of Services 3m/3m saw a decrease of 0.1%, which was in line with the forecast and lower than the previous reading of 0.1%.
- Both Industrial Production m/m and Manufacturing Production m/m saw a decline of 0.3%, which was worse than the -0.1% anticipated and a reversal from the 0.7% growth seen in the prior month.
Moving to the Eurozone’s Industrial Production m/m, it grew by 1.0%, surpassing the forecast of 0.8% and showing a sharp recovery from the previous month’s fall of 3.8%.
In Germany’s bond market, the latest 10-year bond auction ended with an average yield of 2.43, with a bid-to-cover ratio of 1.9, which is slightly higher yield than the previous auction’s yield of 2.31 with a bid-to-cover ratio of 2.3.
Finally, the UK’s NIESR GDP Estimate showed no growth, which was slightly below the prior estimate of 0.1% growth.
A snapshot of the markets currently shows:
- Crude oil is trading up $0.77 at $70.17
- Spot gold is trading up $4.04 or 0.21% $1947.18
- Silver is up up $0.20 or 0.84% at $23.82
- Bitcoin is trading at $25,979 as the price fluctuates above and below the $26,000 level
In the premarket for US stocks, the major indices are trading mixed/little changed. Nasdaq shares are leading the way to the upside once again.
- Dow Industrial Average is trading down -88.12 points after rising 145.79 points yesterday
- S&P index is trading up 6 points after rising 30.10 points yesterday
- NASDAQ index is trading up 27 points after rising 111.40 points yesterday
In the European equity markets, the major indices are trading higher
- German DAX up 0.50%
- France’s CAC up 0.70%
- UK’s FTSE 100 up 0.48%
- Spain’s Ibex up 1.25%
- Italy’s FTSE MIB up 1.23% (delayed)
In the Asian Pacific market today stock indices were mostly higher/mixed:
- Japan’s Nikkei rose 1.47%
- Hang Seng index fell -0.58%
- Shanghai composite index -0.14%%
- Australia’s S&P/ASX 200 index +0.32%
In the US debt market yields are lower. Yesterday the U.S. Treasury finished their coupon notes/bond auctions for the week with a successful auction of 30 year bonds:
- 2-year yield 4.654% -4.2 basis points
- 5-year yield 3.987% -3.4 basis points
- 10-year yield 3.811% -2.8 basis points
- 30-year yield 3.92% -1.8 basis points
In the European debt market, benchmark 10 year yields are mostly higher (the exception is UK 10 year yield):
European benchmark 10 year yields