Daily Market Analysis - FRIDAY JUNE 30, 2023
Key News:
UK - GDP (YoY) (Q1)
UK - GDP (QoQ) (Q1)
Eurozone - CPI (YoY) (Jun)
USA - Core PCE Price Index (MoM) (May)
Thursday witnessed a modest upturn in US stock indices, primarily driven by a surge in bank shares following the Federal Reserve's positive outcome of the annual stress test. Moreover, the release of robust economic data further fueled expectations of additional interest rate hikes by the central bank.
Prominent financial institutions like Wells Fargo, Goldman Sachs, and JPMorgan Chase experienced notable increases in their share prices, surpassing 3% and 4% respectively. This surge can be attributed to the stress test results, which showcased their resilience and ability to withstand a severe economic downturn.
The S&P 500 banks index, reflecting the performance of major banks, witnessed a noteworthy climb of over 2%. This rise contributed to a broader relief rally, which in turn boosted the KBW Regional Banking index by 1.5%.
Wells Frago stock daily chart
Goldman Sachs stock daily chart
S&P 500 daily chart
Investors exhibited a clear inclination towards economically sensitive sectors, while growth sectors tied to interest rates experienced less activity, thanks to positive data that alleviated concerns of an imminent recession.
The Russell 2000 index, which encompasses small-cap stocks, witnessed a notable gain of over 1%. This rise indicated investors' confidence in smaller companies and their potential for economic growth.
Among the sectors within the S&P 500, the materials index emerged as the leader of the upswing. This sector's strong performance further reinforced the market's preference for areas tied to economic expansion and industrial activity.
Nasdaq daily chart
The US dollar index, a measure of the USD's performance against a basket of major currencies, surged to a two-week high in response to encouraging economic data that highlighted a strong labor market. This positive development potentially grants the Federal Reserve the flexibility to continue its trajectory of raising interest rates. The dollar index experienced a 0.35% climb, reaching a level of 103.310. This marks its highest point since June 13 when it peaked at 103.44. The strengthening of the US dollar indicates the market's response to the optimistic economic indicators, suggesting an increased likelihood of further interest rate hikes by the Federal Reserve.
US Dollar Currency Index daily chart
Market expectations for a 25 basis-point rate hike by the Federal Reserve at its upcoming July meeting experienced an increase, rising from 81.8% in the previous session to 86.8%, as reported by CME's FedWatch Tool. This higher probability indicates a growing anticipation among market participants for the central bank to raise interest rates.
Furthermore, the likelihood of a rate cut occurring later in the year has been entirely ruled out. This suggests that market sentiment has shifted towards a more hawkish outlook, with reduced expectations for accommodative monetary policy measures such as rate cuts. The market's assessment aligns with the evolving economic landscape and positive data that may provide the Federal Reserve with the impetus to tighten monetary policy in response to a robust economy.
USD/JPY daily chart
The US dollar continued to exhibit strength against the Japanese yen, extending its streak for the third consecutive day and reaching a fresh 7.5-month high at 144.90 yen. The persistent divergence in monetary policy plans between the US Federal Reserve and the Bank of Japan is expected to contribute to the yen's ongoing weakness against the dollar. The yen declined by 0.23% against the greenback, resulting in an exchange rate of 144.83 yen per dollar. Investors are attentively monitoring any potential intervention by the Bank of Japan in the currency, as it has occurred previously around the 145 yen level.
Meanwhile, gold prices remained relatively unchanged and reflected significant losses for the month of June. This decline can be attributed to robust economic data from the United States, which bolstered risk appetite and raised concerns about potential interest rate hikes by the Federal Reserve.
Earlier in the week, gold prices hit three-month lows, largely driven by a series of hawkish signals from Fed officials, with particular emphasis placed on comments made by Chair Jerome Powell.
On Friday, the release of the Personal Consumption Expenditure Index (PCE), the Fed's preferred measure of inflation, is scheduled for May. Economists surveyed by Reuters anticipate that core rates will remain stable at 4.7%, providing insight into the level of inflationary pressures.
UK - GDP (YoY) (Q1)
UK - GDP (QoQ) (Q1)
Eurozone - CPI (YoY) (Jun)
USA - Core PCE Price Index (MoM) (May)
Thursday witnessed a modest upturn in US stock indices, primarily driven by a surge in bank shares following the Federal Reserve's positive outcome of the annual stress test. Moreover, the release of robust economic data further fueled expectations of additional interest rate hikes by the central bank.
Prominent financial institutions like Wells Fargo, Goldman Sachs, and JPMorgan Chase experienced notable increases in their share prices, surpassing 3% and 4% respectively. This surge can be attributed to the stress test results, which showcased their resilience and ability to withstand a severe economic downturn.
The S&P 500 banks index, reflecting the performance of major banks, witnessed a noteworthy climb of over 2%. This rise contributed to a broader relief rally, which in turn boosted the KBW Regional Banking index by 1.5%.
Wells Frago stock daily chart
Goldman Sachs stock daily chart
S&P 500 daily chart
Investors exhibited a clear inclination towards economically sensitive sectors, while growth sectors tied to interest rates experienced less activity, thanks to positive data that alleviated concerns of an imminent recession.
The Russell 2000 index, which encompasses small-cap stocks, witnessed a notable gain of over 1%. This rise indicated investors' confidence in smaller companies and their potential for economic growth.
Among the sectors within the S&P 500, the materials index emerged as the leader of the upswing. This sector's strong performance further reinforced the market's preference for areas tied to economic expansion and industrial activity.
Nasdaq daily chart
The US dollar index, a measure of the USD's performance against a basket of major currencies, surged to a two-week high in response to encouraging economic data that highlighted a strong labor market. This positive development potentially grants the Federal Reserve the flexibility to continue its trajectory of raising interest rates. The dollar index experienced a 0.35% climb, reaching a level of 103.310. This marks its highest point since June 13 when it peaked at 103.44. The strengthening of the US dollar indicates the market's response to the optimistic economic indicators, suggesting an increased likelihood of further interest rate hikes by the Federal Reserve.
US Dollar Currency Index daily chart
Market expectations for a 25 basis-point rate hike by the Federal Reserve at its upcoming July meeting experienced an increase, rising from 81.8% in the previous session to 86.8%, as reported by CME's FedWatch Tool. This higher probability indicates a growing anticipation among market participants for the central bank to raise interest rates.
Furthermore, the likelihood of a rate cut occurring later in the year has been entirely ruled out. This suggests that market sentiment has shifted towards a more hawkish outlook, with reduced expectations for accommodative monetary policy measures such as rate cuts. The market's assessment aligns with the evolving economic landscape and positive data that may provide the Federal Reserve with the impetus to tighten monetary policy in response to a robust economy.
USD/JPY daily chart
The US dollar continued to exhibit strength against the Japanese yen, extending its streak for the third consecutive day and reaching a fresh 7.5-month high at 144.90 yen. The persistent divergence in monetary policy plans between the US Federal Reserve and the Bank of Japan is expected to contribute to the yen's ongoing weakness against the dollar. The yen declined by 0.23% against the greenback, resulting in an exchange rate of 144.83 yen per dollar. Investors are attentively monitoring any potential intervention by the Bank of Japan in the currency, as it has occurred previously around the 145 yen level.
Meanwhile, gold prices remained relatively unchanged and reflected significant losses for the month of June. This decline can be attributed to robust economic data from the United States, which bolstered risk appetite and raised concerns about potential interest rate hikes by the Federal Reserve.
Earlier in the week, gold prices hit three-month lows, largely driven by a series of hawkish signals from Fed officials, with particular emphasis placed on comments made by Chair Jerome Powell.
On Friday, the release of the Personal Consumption Expenditure Index (PCE), the Fed's preferred measure of inflation, is scheduled for May. Economists surveyed by Reuters anticipate that core rates will remain stable at 4.7%, providing insight into the level of inflationary pressures.
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