Moving markets today: Asian markets hit 27-month highs, oil prices fall; US dollar stable as UK election takes centre stage
On Wednesday, US stocks closed at new record highs, marking the second consecutive day of gains in a shortened trading session ahead of the July 4th holiday. Meanwhile, in Asia, stocks reached their highest levels in over two years on Thursday. This rally was spurred by softer US economic data, which lowered expectations for an interest rate hike in September. As a result, bonds and commodities rose while the dollar weakened. Oil prices declined following disappointing US employment and business activity figures, indicating a potential slowdown in the world’s largest oil-consuming economy. Gold prices rose slightly on Thursday, boosted by speculation that the Federal Reserve might cut interest rates in September due to the softer economic data. In the UK, polls suggest that Labour is likely to achieve a significant victory in the upcoming election. The latest Federal Reserve meeting minutes emphasized the need for clearer evidence of slowing inflation before any rate cuts are considered. Investors are also awaiting reports on May job openings and June’s Nonfarm payrolls, which will provide further insights into the US labour market. Despite gains in the FTSE 100 on Wednesday, futures indicate a subdued start to trading on Thursday. Here are five key takeaways for your day.
UK election polls favour labour with predicted landslide victory
On Thursday, Britain is gearing up for elections where Sir Keir Starmer is anticipated to lead Labour to a sweeping victory, possibly delivering one of the Conservative party’s most significant electoral defeats under Rishi Sunak’s leadership.
Multiple polls suggest Starmer could secure a House of Commons majority exceeding 200 seats, surpassing even Sir Tony Blair’s 179-seat majority in 1997.
If realized, this would mark Labour’s first general election triumph since 2005, signaling a potentially historic shift in political landscape.
Fed seeks concrete proof of inflation decline before considering rate cuts, minutes show
Federal Reserve officials, as revealed in the minutes from their June meeting published on Wednesday, underscored their cautious stance on cutting interest rates.
They emphasized the requirement for more evidence of inflation slowing down before any rate adjustments could be considered.
Additionally, the officials showed increased attention to the potential risks posed by a cooling labor market, indicating a watchful approach towards economic conditions.
They noted that “price pressures were diminishing” across various sectors of the economy, highlighting ongoing concerns amidst economic fluctuations.
Japanese firms award largest pay hikes in over three decades
This year, Japanese companies have given the largest wage increases in three decades, driven by labour shortages and rising inflation affecting household incomes, the nation’s largest union reported on Wednesday.
According to a survey conducted since March by Rengo, which has about 7 million members, workers’ monthly pay will increase by an average of 5.10 per cent this fiscal year.
However, larger companies with 300 or more union-backed employees raised wages by 5.19 per cent, while smaller firms increased pay by 4.45 per cent, Reuters reported.
What’s on the radar
On Thursday, all eyes will be on the UK election results, with most analysts predicting a decisive win for Labour after a long time out of power.
There are no major economic releases scheduled in the UK, and US markets will be closed for the July 4 holiday.
Meanwhile, Germany’s finance ministry will release factory orders data for May. Investors are also keenly anticipating the June Nonfarm payrolls report, set to be released on Friday.
Asian markets soar to 27-month peak, dollar dips on rate cut expectations
The S&P 500 increased by 0.51 per cent, closing at 5,537.02 points, while the Nasdaq Composite rose 0.88 per cent to 18,188.30. In contrast, the Dow Jones Industrial Average slipped 0.07 per cent to end at 39,308.00.
US financial markets will be closed on Thursday for the July 4 holiday.
In Europe, futures for the EURO STOXX 50 declined by 0.12 per cent, and the FTSE 100, which went up 0.6 per cent on Wednesday, indicated a slight increase of 0.07 per cent in futures to 8,211.0 points on Thursday.
Over in Asia, Japan’s Nikkei N225 climbed 0.4 per cent, approaching its peak from March, while the broader Topix index hit record highs. South Korea’s Kospi rose 0.6 per cent, moving past a 2,800-point threshold last reached in January of 2022. Hong Kong’s Hang Seng rose 0.2 per cent and Chinese blue-chip CSI 300 traded nearly flat.
The dollar index, measuring the greenback against a basket of other currencies, stayed flat at 105.28 after briefly hitting its lowest point since June 13 at 105.04 on Wednesday.
The dip in the dollar boosted commodities, with gold rising to $2,358 an ounce from $2,318 at the start of the week.
Oil prices saw a minor decrease after a significant drop in US crude stockpiles suggested stronger demand as the driving season begins. Brent crude went down 31 cents to $87.03 a barrel, and US crude fell 33 cents to $83.55 a barrel.