Moving markets today: Asian stocks subdued, gold hits record highs, oil prices climb, Amazon sets new record, Fed officials cautious about rate cut; Focus turns to Q1 earnings and UK monthly GDP
Stocks on Wall Street experienced a significant rise on Thursday, reversing the downward trend seen in the previous session, with notable gains led by Big Tech companies. Meanwhile, gold prices surged to record highs on Friday, driven by geopolitical tensions that spurred demand for the precious metal. However, Asian stock markets remained relatively subdued. Oil prices also climbed due to increased tensions in the Middle East. Amazon’s stock reached a record high for the first time since 2021. Additionally, Federal Reserve officials signalled a cautious approach regarding interest rate cuts amidst growing concerns about inflation. The earnings reporting season for major US banks unofficially commenced on Friday. Investors also awaited the release of key economic indicators, including the UK monthly Gross Domestic Product (GDP) for February and the preliminary US Michigan Consumer Sentiment Index for April later in the day. Here are five key takeaways for your day.
Fed officials cautious on rate cuts amid rising inflation
More and more Federal Reserve officials are expressing caution about rushing into interest rate cuts. This caution stems from the persistently high levels of US inflation, which remain uncomfortably high. This concern not only affects decisions within the US but also influences expectations for monetary policy adjustments globally, Reuters reported.
New York Fed President John Williams emphasized to reporters that there’s currently no urgent need to change monetary policy. This statement came after a day when unexpectedly strong consumer price inflation led traders and analysts to predict that Fed rate cuts might come later than expected and could be fewer in number.
Meanwhile, Boston Fed President Susan Collins, speaking at a separate event in New York, echoed similar sentiments. She noted that recent data suggest it may take longer than previously anticipated to become confident in the decline of inflation before considering policy adjustments. Collins also highlighted that a strong labour market reduces the need for immediate policy easing.
Gold hits record high; oil prices rise amid Middle East tensions
Gold prices continued their ascent, rising by nearly 1 per cent to hit a new all-time high of $2,395.29 per ounce. This surge in gold’s value has been fuelled by stronger-than-expected US inflation figures, prompting investors to seek refuge in gold as a hedge against inflation and market uncertainties.
In 2024, gold has seen remarkable gains, surpassing 15 per cent, marking its strongest performance since 2017. This rally in the yellow metal has been driven by various factors, including geopolitical tensions such as the Israel-Hamas conflict and persistent inflation in major economies.
On the other hand, oil prices experienced an early boost in trading on Friday due to escalating tensions in the Middle East. Following a suspected Israeli air strike on Iran’s embassy in Syria, Iran has pledged retaliation, raising concerns about potential disruptions to oil supplies from the region.
Brent crude futures rose by 0.7 per cent to $90.37 a barrel, while US West Texas Intermediate crude futures climbed by 0.86 per cent to $85.74 a barrel.
These gains helped to offset some of the losses from the previous session, driven by worries about stubbornly high US inflation, which dampened hopes for an interest rate cut as soon as June.
The tensions in the Middle East have further heightened, particularly with the April 1 strike on Iran’s embassy in Damascus, adding strain to a region already embroiled in conflicts like the Gaza war.
Amazon achieves record high share close, first since 2021
Thursday saw Amazon’s stocks reaching an unprecedented high, continuing a remarkable upward trend over the past six months. This surge not only lifted Amazon but also boosted several other prominent tech stocks on Wall Street. Amazon’s stock price closed at $189.05, marking a 1.7 per cent increase for the day and an impressive nearly one-quarter surge in value for the year 2024, the FT reported.
With a market capitalization of $1.96 trillion, Amazon now stands as the fourth most valuable company on Wall Street, trailing only behind industry giants like Microsoft, Apple, and Nvidia, which are part of the prestigious “Magnificent Seven” group.
Stock market rally faces trial as Q1 earnings season takes centre stage
The start of the first quarter earnings season is here, with big names like JPMorgan, Citi, State Street, Wells Fargo, and BlackRock set to unveil their financial performance. Following them, companies like Netflix, Procter & Gamble, UnitedHealth, and Travelers Cos will report their results next week.
The S&P 500 has seen a solid 9.1 per cent increase so far this year, largely driven by expectations of multiple interest rate cuts by the US Federal Reserve. However, these hopes have dimmed after March’s unexpectedly high inflation numbers, leading investors to search for other reasons to keep buying stocks. Many believe that strong corporate profits could be the fuel for the next phase of market growth.
Analysts predict that companies within the S&P 500 will announce their third consecutive quarter of earnings growth. They estimate that profits for the first quarter have risen around 3.2 per cent compared to the same period last year, according to data from FactSet.
Later today, investors will keep an eye on the UK’s monthly Gross Domestic Product (GDP) figures for February and the preliminary US Michigan Consumer Sentiment Index for April.
Wall Street rally after Wednesday slump, Asia markets stay quiet
The latest market movements show a mixed bag of performances across major US indices. The Dow Jones Industrial Average experienced a marginal decrease of 0.01 per cent, settling at 38,459.08 points. Conversely, the S&P 500 saw a notable uptick of 0.74 per cent, reaching 5,199.06 points, with the technology sector leading the charge while the financial sectors trailed behind. The Nasdaq Composite exhibited the most significant surge, rising by 1.68 per cent to 16,442.20 points, with the FANG+ index particularly shining with a gain of 2.6 per cent.
In Asia, market sentiment appeared subdued as investors deliberated over the Federal Reserve’s stance on interest rates amid uncertainties in the US inflation outlook. Initially, Japan’s stock markets mirrored the upward trajectory seen in the US, resulting in a 0.6 per cent surge in the Topix, the Nikkei 225 was up 0.5 per cent.
However, other Asian markets experienced minor setbacks. South Korea’s KOSPI slipped by 0.56 per cent, and Singapore’s Straits Times Index dipped by 0.2 per cent. Both countries’ central banks opted to maintain their existing policies. Hong Kong faced the most substantial losses, with the Hang Seng index plummeting by 1.6 per cent due to pressure from property shares. On the other hand, Mainland China’s blue-chip index, the CSI300, remained relatively stable.
Despite discussions of potential government intervention, the yen continued its weakening trend against the dollar, dropping by 0.15 per cent to ¥153.04. In contrast, the dollar index, gauging the dollar against several currencies including the yen and euro, surged to 105.26, its highest level since November 14, with a weekly increase of 0.95 per cent.