Moving markets today: Asian stocks dip on China-EU trade concerns; bitcoin slides, gold rises on softening Treasury yields; All eyes on US PCE inflation and US presidential debate
Asian markets showed caution as they awaited key US inflation data, hoping for signs that inflationary pressures might ease. There was concern over the possibility of Japan intervening in currency markets as the dollar approached 160 yen. Bitcoin continued to decline, while oil prices dropped for a second consecutive day due to a stronger dollar and renewed worries about prolonged higher interest rates. Gold prices saw a slight increase as US Treasury yields softened. The Bank of Japan’s June meeting minutes revealed discussions about the potential need for a timely increase in interest rates. A poll by the Financial Times showed that Marine Le Pen’s Rassemblement National is perceived as more trustworthy on economic matters among French voters. China reported a 2.8 per cent decrease in fiscal revenue for the period from January to May. This week, major retailers such as H&M, Walgreens Boots Alliance, Halfords, Nike, and FedEx are expected to announce their earnings. Lloyds Banking Group will update its strategic plans, and two UK companies are scheduled to be delisted from the stock market. Economic highlights include the final Q1 GDP figures from both the US and UK, speeches by Federal Reserve officials including Mary Daly, Lisa Cook, and Michelle Bowman, and the release of the inflation report on Thursday. Geopolitically, the focus is on the first US presidential debate and the beginning of the French election campaign. The FTSE 100 closed lower on Friday, with futures pointing to a weak start for Monday’s trading session. Here are five key takeaways for your day.
BOJ considers timely rate hike in June meeting, minutes reveal
In June, the Bank of Japan discussed the potential for raising interest rates soon due to concerns about inflation surpassing expectations. According to a summary of their meeting on June 13-14, one policymaker argued for an immediate rate hike to preempt possible inflation risks. The recent weakening of the yen has also increased the likelihood that the BOJ may revise its inflation forecasts upward, indicating a possible need for a higher policy rate.
On another front, Masato Kanda, Tokyo’s top currency official, reaffirmed Japan’s readiness to intervene in the market to counter significant movements, particularly as the yen approached 160 against the dollar. This level is widely seen as a crucial threshold for market stability. Previously, Japan intervened with around 9.8 trillion yen ($61.64 billion) when the yen reached a 34-year low of 160.245 per dollar on April 29.
Marine Le Pen’s RN seen as most trusted on economy in France: FT poll
Emmanuel Macron’s centrist political alliance is encountering difficulties in convincing voters that its opponents would mishandle the economy. Recent polling suggests that the far-right Rassemblement National, led by Marine Le Pen, is perceived as more trustworthy on economic issues.
According to an Ipsos poll conducted for the Financial Times on June 19-20, 25 per cent of respondents indicated they have more confidence in Rassemblement National’s ability to make the right economic decisions. This highlights a significant challenge for Macron’s coalition as it navigates public opinion and prepares for upcoming political engagements.
China’s fiscal revenue declines 2.8 per cent in first five months of 2024
China’s fiscal revenue fell by 2.8 per cent in the first five months of 2024, slightly worse than the 2.7 per cent decline in January-April, due to weak demand. Fiscal spending increased by 3.4 per cent, down from 3.5 per cent earlier. To meet its 5 per cent growth target, China plans more fiscal stimulus amid rising trade tensions with the West, Reuters reported.
Key events to watch this week
This week, corporate earnings reports are back in the spotlight, with major retailers like H&M, Walgreens Boots Alliance, Halfords, Nike, and FedEx taking centre stage. Lloyds Banking Group is also set to provide a strategy update on Thursday. Meanwhile, the UK stock market will bid farewell to two more companies.
On the economic front, we’ll see final first-quarter GDP numbers from the US and the UK, accompanied by various surveys and speeches from central bankers. Notably, at least five Federal Reserve officials, including San Francisco Fed President Mary Daly and Governors Lisa Cook and Michelle Bowman, are scheduled to speak this week.
Investors will pay close attention to key economic data, especially Thursday’s US PCE inflation report, to determine if the recent downward trend in inflation continues.
Geopolitical events are also in focus, with the first US presidential debate on Thursday and the opening round of the French election over the weekend.
Asian shares slip; bitcoin continues to plunge
In Asian markets, Japan’s Topix index saw a modest increase of 0.2 per cent, while South Korea’s Kospi and Australia’s S&P/ASX 200 both experienced a 0.6 per cent decline. Taiwan’s Taiex index dropped 1 per cent, with Taiwan Semiconductor Manufacturing Company, its largest component, falling by 1.7 per cent.
Futures for the S&P 500 and Nasdaq each edged up by about 0.1 per cent. In Europe, the EURO STOXX 50 futures rose slightly by 0.06 per cent. The FTSE 100 ended Friday down by 0.4 per cent, and its futures pointed to a weak start on Monday, decreasing by 0.30 per cent to 8,255.0 points.
Bitcoin fell by 1.6 per cent during early trading in Asia on Monday, extending a sell-off that has caused the cryptocurrency to lose over 10 per cent of its value since early June. The price of Bitcoin dropped to $63,157, which, although below its record highs from March, is still up more than 40 per cent for the year so far.
In the commodities market, gold prices dropped to $2,317 an ounce due to a strong dollar. Oil prices also dipped slightly after a 3 per cent rise last week, with Brent crude falling by 40 cents to $84.84 a barrel and US crude decreasing by 39 cents to $80.34 a barrel.
However, spot gold rose by 0.2 per cent to $2,324.36 an ounce.