Moving markets today: Asian markets rally with Wall Street, oil rises on Gaza strike, gold gains ground; Focus shifts to BOE policy decision and UK GDP
In the financial world, the week kicked off with a surge in US stocks, which closed more than 1 per cent higher. Investors seemed optimistic, factoring in potential interest rate cuts before the year’s end. This positive momentum spilt over to Asian markets, reflecting the upbeat sentiment seen on Wall Street. Meanwhile, oil prices saw a slight uptick following an Israeli strike in Gaza, amid ongoing ceasefire negotiations with Hamas. The uncertainty surrounding the ceasefire situation prompted a rise in gold prices, as investors sought safe-haven assets amidst geopolitical tensions and bets on future rate cuts by the US Federal Reserve. Australia’s central bank holds rates at 4.35 per cent and raised inflation forecasts. On the economic front, the UK witnessed a slowdown in consumer spending for April, despite expectations of increased activity due to the Easter holiday period. In Japan, authorities signalled preparedness to intervene in currency markets to stabilize rapid fluctuations in the yen’s value. Looking ahead, investors are eyeing key macroeconomic events, including updates from the Bank of England (BoE) and the release of UK GDP growth figures. Additionally, market participants are eagerly anticipating earnings reports from major companies such as Tyson Foods, Disney, Uber Technologies, Warner Bros Discovery, and UK-based ITV. Here are five key takeaways for your day.
Australia’s central bank holds rates at 4.35 per cent, raises inflation forecasts
Australia’s central bank has significantly revised its forecast for headline inflation and ruled out the possibility of a rate cut for the remainder of this year. This indicates that borrowers may not see any relief from interest rates until at least 2025.
Following its May policy meeting, the Reserve Bank of Australia (RBA) opted to keep interest rates steady at 4.35 per cent, the level set since a hike last November. While market expectations leaned towards no change, there was a slight chance of a rate increase due to inflation not slowing as much as anticipated in the first quarter of the year, Reuters reported.
UK consumer spending slows in April despite easter boost
British consumers spent cautiously last month despite Easter’s influence on spending habits. Barclays reported a mere 1.6 per cent growth in consumer spending on its payment cards in April, the slowest since February 2021, Reuters reported.
Adjusted for inflation, this marked a decline from March’s 1.9 per cent growth. Similarly, the British Retail Consortium noted a significant drop in retail sales values compared to the previous year.
In April, sales fell by 4.0 per cent year-on-year, following a 3.5 per cent increase in March. Overall, sales for March and April combined showed only a slight 0.2 per cent increase compared to the same period last year.
Japan signals readiness to intervene amid swift currency fluctuations
Masato Kanda, Japan’s top currency official, emphasized on Tuesday the potential for Japan to respond to disruptive and speculative-driven movements in foreign exchange markets. This underscores Tokyo’s willingness to step in if needed to support the yen, which is currently in a fragile state.
Last week, it’s suspected that Tokyo intervened on multiple occasions to bolster the yen as it plunged to levels not seen in over three decades. According to data from the Bank of Japan, authorities spent over 9 trillion yen to defend the currency. This intervention helped push the yen from a 34-year low of 160.245 per dollar to a level of around 151.86, marking roughly a one-month high, all within a week.
What’s coming up
UK market observers are noting a relatively quiet week ahead, but there are still significant events on the radar. The Bank of England’s update and the release of UK GDP growth figures will be closely watched, along with preliminary consumer sentiment data from the University of Michigan in the US and insights into the Canadian job market. The BoE’s decision on the Bank Rate, expected to remain unchanged at its upcoming meeting, will be closely watched for any signals on monetary policy.
China’s trade figures and Germany’s factory orders will also be under scrutiny.
Financial markets in London, Tokyo, and Seoul are starting the week a bit later due to holidays like May Day and Children’s Day, but there’s still plenty of corporate news to digest.
Media companies are in focus this week, with heavy hitters like Disney, Fox, Warner Bros Discovery, and UK-based ITV all scheduled to report earnings. Additionally, BP’s first-quarter earnings report on Tuesday is expected to show strong growth in gas trading but potentially weaker fuel margins, the FT reported.
Asian markets rise in sync with Wall Street surge, Japan’s yen sees volatility
The US stock market showed positive movement, with key indices like the Dow Jones, S&P 500, and Nasdaq Composite all experiencing gains. The Dow Jones increased by 0.46 per cent to reach 38,852.27 points, while the S&P 500 and Nasdaq Composite surged by 1.03 per cent and 1.19 per cent respectively, with the S&P 500 closing at 5,180.74 points and the Nasdaq Composite at 16,349.25 points.
Most sectors within the S&P 500 ended on a high note, particularly the energy sector, which saw a significant surge attributed in part to the rise in US natural gas futures.
Chip manufacturers experienced widespread gains, with notable increases seen in Arm Holdings, Micron Technology, Advanced Micro Devices, and Super Micro Computer. Paramount Global also saw a rise after ending exclusive negotiations with Skydance Media. Conversely, Tyson Foods faced a decline despite surpassing profit expectations due to consumer pressure from inflation.
In Asia, South Korea’s Kospi led gains with a 1.8 per cent increase, while Hong Kong’s Hang Seng index slightly decreased by 0.2 per cent after a period of consecutive gains. Japan’s yen fluctuated throughout the day, briefly dropping below ¥154 per dollar before settling at ¥154.45.
US government bond movements remained relatively subdued, with minor increases seen in the two-year yield, which inched up by 0.03 per centage points to 4.84 per cent as bond prices dipped slightly.
In commodities, Brent crude futures rose by 0.26 per cent to $83.54 per barrel amidst challenges in the Middle East. Gold prices increased overnight and remained stable at $2,325 per ounce on Tuesday.