Moving markets today: Asian markets surge on rate-cut hopes, Australia’s Q1 growth slows, China’s service sector expands; global PMIs, Computacenter take centre stage
US stocks closed with modest gains on Tuesday, buoyed by weaker-than-expected labour market data that reinforced expectations of an impending interest rate cut by the Federal Reserve. Meanwhile, Asian stocks saw upward momentum on Wednesday, while the dollar remained stable amidst signs of softening in the US job market. Oil prices continued their decline for the sixth consecutive day due to significant increases in US oil and fuel inventories. Similarly, gold prices dipped as attention shifted towards upcoming US job data. In China, robust activity in the services sector contributed to a rise in employment levels. However, Australia’s economy experienced a slowdown in the first quarter, with a meagre 0.1 per cent quarterly growth rate. Intel made headlines by securing $11 billion in financing from Apollo in a joint venture. The focus in the middle of the week turned towards the global services sector, with several survey results for May slated for release. The upcoming non-farm payrolls report on Friday holds significant importance. The European Central Bank is expected to announce a rate cut on Thursday, diverging from the stance of the US Federal Reserve, while the Bank of Canada’s decision is scheduled for Wednesday. The FTSE 100 closed lower on Tuesday, driven by declines in resource stocks following a drop in commodity prices, but futures indicated a higher opening on Wednesday. Here are five key takeaways for your day.
China’s Caixin PMI shows accelerated services sector growth in 10 months
China’s services sector experienced substantial growth in May, marking its most rapid expansion in 10 months. This growth coincided with a boost in staffing levels for the first time since January, signalling a sustained recovery in the second quarter. A private sector survey revealed that the Caixin/S&P Global services purchasing managers’ index (PMI) climbed to 54.0 from April’s 52.5. This marked the 17th consecutive month of expansion and the quickest pace since July 2023. In this index, readings above 50 indicate expansion, while below 50 suggest contraction.
Australian economy nearly stalls in Q1
Australia’s economy experienced a significant slowdown in the March quarter, primarily due to factors like high borrowing costs and ongoing inflation, which restrained consumer spending. Despite hopes for interest rate relief, it seems distant at the moment. Data released by the Australian Bureau of Statistics revealed that real GDP only increased by 0.1 per cent in the first quarter, slightly below the anticipated 0.2 per cent. Annually, growth dipped to 1.1 per cent, down from the previous quarter’s 1.5 per cent, marking the slowest pace in thirty years, excluding the pandemic period.
Intel strikes $11bln financing from Apollo in joint venture
Apollo Global and Intel have signed an $11 billion financing deal to support Intel’s chip manufacturing plant in Leixlip, Ireland, highlighting the increasing reliance on private capital for expansion efforts. As part of the agreement, which was detailed last month, Apollo will acquire a 49 per cent equity stake in a joint venture tied to the facility. Intel expects the transaction to be completed in the second quarter of 2024. The “Fab 34” chip factory, nearing completion, will produce Intel’s newest PC and data centre chips.
What’s on the radar
Midweek attention will shift to the global services sector as a series of survey results for May are released. The highlight will be the report from the US Institute for Supply Management (ISM). Additionally, final readings for the UK and euro area services PMIs will be published, with the euro area data due out as well.
US consultancy ADP’s monthly private sector payroll report might also grab headlines.
The main economic focus will be the European Central Bank’s interest rate decision on Thursday, accompanied by various early-month data releases. There is an 80 per cent chance that the Bank of Canada will reduce its rate to 4.75 per cent today, with a total expected cut of 59 basis points over the year.
Key data to watch include US employment figures and EU GDP data on Friday. The US jobs report is particularly significant as it will be the last major economic indicator before the Federal Reserve’s monetary policy meeting on June 11-12.
On the corporate side, Computacenter is set to hold a Capital Markets Day.
Asian equities advance on strong PMI figures
The Dow Jones Industrial Average climbed 0.36 per cent to close at 38,711.29, the S&P 500 went up 0.15 per cent to 5,291.34, and the Nasdaq Composite saw a 0.17 per cent rise, ending at 16,857.05. Wall Street’s main indexes recovered from earlier losses, with real estate and consumer staples stocks leading the gains, while materials and energy sectors faced the biggest declines.
Major tech companies like Amazon.com, Alphabet, Nvidia, and Microsoft rebounded and closed higher after starting the session in the red. On the other hand, Exxon Mobil and Chevron saw drops of 1.6 per cent and 0.8 per cent respectively, influenced by concerns over oil demand.
Bath & Body Works experienced a sharp decline of 12.8 per cent due to a downgraded quarterly profit forecast. Axos Financial also fell after Hindenburg Research disclosed a short position against it, and Paramount Global slipped 4.4 per cent following news that it was exploring strategic alternatives or a partnership for its Paramount+ streaming service.
The FTSE 100 index in the UK ended lower on Tuesday, impacted by falling commodity prices which hit resource stocks. However, futures are indicating a positive start for Wednesday. European markets showed signs of optimism with EUROSTOXX 50 futures up 0.24 per cent and FTSE 100 futures rising 0.50 per cent to 8282.5. In the US, S&P 500 futures increased by 0.17 per cent and gained 0.28 per cent.
In Asian markets, South Korea’s Kospi index rose by 1.1 per cent, thanks to gains in Samsung after Nvidia announced plans to certify Samsung’s high bandwidth memory chips. Hong Kong’s Hang Seng index went up by 1.3 per cent, and the Hang Seng Tech index, which includes several Chinese tech companies, increased by 1.5 per cent. In contrast, Japan’s Topix index fell by 1.3 per cent following the release of wage data. The yen weakened by 0.4 per cent against the dollar, settling at ¥155.44.
The dollar index, which measures the US dollar against six other major currencies, remained steady at 104.14 in early trading after touching a nearly two-month low of 103.99 on Tuesday.
In the commodities market, oil prices continued to decline slightly during early Asian trading due to concerns about demand following reports of increased US crude and fuel inventories. Brent crude futures dropped 0.1 per cent to $77.47 a barrel, and US West Texas Intermediate crude futures fell 0.12 per cent to $73.16 a barrel. Meanwhile, gold prices edged up by 0.09 per cent, reaching $2,330 per ounce.