Market News – Erosion in Fed rate cut odds; Stocks, Oil & Gold under pressure

Economic Indicators & Central Banks:

Nvidia bigger than entire stock market – Market cap now greater than Australia,  South Korea and Russia.

• After the massive Nvidia beat, rallying over 9% on the day, failed to reinvigorate the rally at the close. It was unable to support the major indexes.
• Wall street: The profit takers ruined the party, taking advantage of recent record highs to take some chips off the table. Erosion in Fed rate cut expectations provided extra incentive to sell.
• Strong US economic activity: Strong PMI, tight jobless claims, slump in Home sales and high home prices pushed Fed rate cut expectations further back. US jobs data released showed initial applications for unemployment were slightly lower than expected, indicating the economy was holding up despite high rates. The data, Fedspeak and the FOMC minutes, have cast doubt over whether officials will have enough evidence of the disinflation trend to begin cutting rates by September.
• It is an early close in bonds today and that could accelerate activity as traders position ahead of the long Memorial Day weekend.

Asian & European Open:

• Asian equities dropped today, following Wall Street lower.
• Chinese officials announced an Rmb300bn ($42bn) lending package to help buy back real estate from the nation’s indebted property developers.
• Japan: Inflation slowed for the 2nd straight month in April, making it difficult for BOJ to proceed with further tightening. Inflation could pick up due to weaker Yen and rising Oil.
• BOE UK consumer confidence recovered while retail sales slumped. For the BoE that means there is less risk of a wage-price spiral as companies will increasingly struggle to pass on higher labor costs. More arguments in favor of an early rate cut then, despite recent data showing that headline inflation is not coming down as fast as hoped.

Financial Markets Performance:

• The USDIndex found its footing, extending against G10 for a 5th day.
• Pound dropped after the UK Retail Sales, with GBPUSD at 1.2670.
• Oil declined after hitting its 3-month low as the market flashed signs of weakness ahead of the US summer driving season. Elsewhere, Gold remains weak at $2337, for a 3rd day.

Market Trends:

• The Dow lost -1.5% to 39,065 with Boeing down over -7%. Live Nation dove as the DoJ filed suit to divest Ticketmaster. The S&P500 slumped -0.74% to 5267. And the NASDAQ declined -0.39%.

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Andria Pichidi

Market Analyst

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