Categoria: Top News

Investing.com– Most Asian stocks fell on Wednesday, weighed by persistent concerns that sticky inflation will push major central banks into keeping interest rates high for longer.

Chinese markets were somewhat of an exception, advancing slightly after the government announced more measures to support the beleaguered property sector.

Regional stocks took middling overnight cues from Wall Street, which was boosted chiefly by a rally in NVIDIA Corporation (NASDAQ:NVDA), which in turn pushed the NASDAQ Composite to record highs. 

But beyond tech, broader U.S. stocks were muted in anticipation of key inflation data due later this week. Federal Reserve officials also kept up their hawkish commentary on interest rates. 

U.S. stock index futures were flat in Asian trade. 

Australia sinks on inflation shock, RBA jitters 

Australia’s ASX 200 index was among the worst performers in Asia, sinking 1% after consumer price index inflation data read stronger than expected for April.

The reading marked a second straight month of increased inflation, and drummed up concerns over a more hawkish Reserve Bank of Australia.

Sticky inflation could push the RBA into keep rates high for longer, or even potentially raising rates further this year, as it moves to bring down inflation.

The central bank had considered a rate hike in its May meeting, and had signaled that it would not rule out any measures to bring down sticky inflation. 

Japanese stocks hit by mixed BOJ signals 

Japan’s Nikkei 225 index fell 0.3%, while the broader TOPIX index lost 0.5% on Wednesday.

Bank of Japan member Adachi Seiji warned that excessive declines in the yen could attract policy tightening by the central bank, especially if it impacted inflation.

Adachi also forecast that inflation would pick up in the summer-autumn period, and that the BOJ will gradually phase out its stimulative asset purchase programs. 

But he warned against any quick increases in interest rates, due to risks to Japan’s economy, and stressed on the need to keep policy accommodative in the near-term. 

Broader Asian stocks also retreated, as anticipation of more cues on U.S. inflation and interest rates battered sentiment. 

South Korea’s KOSPI fell 0.9%, while futures for India’s Nifty 50 index pointed to a negative open, with the index set for more profit-taking after hitting record highs this week.

Hong Kong’s Hang Seng index slid nearly 1% on profit-taking in technology stocks, which offset gains in the property sector.

Chinese stocks rise on more property support 

China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes were the sole gainers in Asia on Wednesday, rising 0.5% and 0.4%, respectively. 

A slew of major Chinese cities, including Shanghai and Shenzhen, were seen further loosening restrictions on home buying and lending requirements for property investment. 

The measures come just weeks after Beijing announced a swathe of supportive measures for the property market, a slowdown in which has been a major point of contention for the Chinese economy.

Bank of America (BofA) analysts predict that momentum traders, or trend followers, will persist in adding to their equity long positions across major global markets, including the US, Europe, and Japan.

This trend is anticipated despite long positions not yet reaching the highs observed earlier this year, as shorter-term price trends are still in recovery mode following an April dip.

In their recent note, BofA stated, “Long positions are not yet back to highs we saw earlier this year as shorter-term price trends are still recovering from the April dip.” 

However, they caution about the situation in China, highlighting that long positioning is “stretched with unwind HSI and HSCEI unwind triggers less than 1% away.”

BofA’s analysis also points to developments in the SPX options market. They reported that the SPX option gamma ended Friday at +$7.6 billion, placing it in the 97th percentile. 

Although this is a slight decrease from the prior week’s remarkable levels of around $9.5 billion, the impact on volatility remains notable. “Our estimates suggest that the reduction in 1-month S&P realized volatility due to gamma has likewise increased in magnitude and is now ~1.25pts (10%),” BofA noted.

Semiconductor stocks remain highly crowded, standing about a standard deviation above their long-term trend, although long crowding has slightly decreased from last month, UBS analysts said in a Monday note.

Crowding refers to a situation where many similar market participants hold similar positions in a security, either long or short. High crowding scores indicate a risk of investors reversing their positions, with positive scores showing long-crowding and negative scores indicating short-crowding.

Within the semiconductor space, analog and foundry sub-sectors have been an exception, having seen an increase in long crowding over the past month.

When it comes to individual stocks, NVIDIA (NASDAQ:NVDA), Qualcomm (NASDAQ:QCOM), and Lam Research (NASDAQ:LRCX) remain the most crowded stocks in UBS’s coverage, while Microchip Technology (NASDAQ:MCHP) and ON Semiconductor (NASDAQ:ON) are the least crowded.

Globally, United Microelectronics (UMC) and Infineon appear even less crowded than MCHP and ON.

AMD (NASDAQ:AMD), previously the most controversial stock in their coverage, has become less crowded and now screens about Neutral, presenting “a good backdrop as we expect MI300 revenue to continue growing in 2H as supply chain work suggests module makers remain on track,” analysts noted.

Moreover, Broadcom (NASDAQ:AVGO) has seen a significant reduction in crowding and now also screens about Neutral.

UBS said it is also receiving more inquiries about the analog sector, but Texas Instruments (NASDAQ:TXN), which was upgraded a few months ago, still ranks among the least crowded stocks in their coverage.

The largest one-month changes among key semiconductor stocks were all negative, UBS noted, with AMD, AVGO, and KLAC each witnessing big declines.

“Investor positioning across the group also become a bit less long crowded over the past month with long crowding declining for ~2/3 of our coverage universe and most of the increases in long crowding being in analog stocks,” analysts added.

The S&P 500 could dip below the 5000 threshold if macroeconomic pressures, most notably high inflation, continue to persist, RBC Capital Markets analysts said in a Monday note.

In their report, the investment bank stresses that the market’s current price-to-earnings (P/E) ratio could decrease under prolonged inflationary pressures and a lack of anticipated interest rate cuts by the Federal Reserve.

RBC’s base model, which leverages consensus forecasts on economic variables, suggests that the S&P 500 should trade at around 21.5x earnings by the end of 2024, potentially placing the index at 5100 to 5300 if their earnings per share (EPS) forecast of $237 for 2024 is accurate.

However, in a stress test scenario considering no Fed rate cuts, higher-than-expected inflation, and 10-year Treasury yields not rising above 5%, the P/E ratio could drop to 20.8x, pushing the S&P 500 down to a range of 4900-5100.

In another stress test, where inflation exceeds 3% and the 10-year yield rises to 5.5%, the trailing P/E retreats to 19.1x “and points to about 4,500 for fair value for the S&P 500 on our EPS forecast and the 4,600-4,700 range using consensus EPS,” RBC strategists said in a note.

Meanwhile, RBC also reflected on the latest performance of small caps versus large caps.

Small caps, as measured by the Russell 2000, have been retesting their relative lows compared to the S&P 500, the investment bank notes.

Despite a brief rally driven by Fed rate cut optimism in early May, small caps have struggled, with only 62% of Russell 2000 companies beating consensus estimates in the recent reporting season, compared to 77% for the S&P 500.

JPMorgan strategists believe investors should consider shifting towards defensive and commodity stocks in anticipation of upcoming rate cuts by central banks.

Historically, defensives have struggled when bond yields were rising, but this phase might be ending, the Wall Street giant notes.

Now, during the November-December episode, cyclicals rallied as the US 10-year yield tumbled 120 basis points, from 5.0% to 3.8%. According to JPMorgan, the rally was driven by market anticipation of an acceleration in activity, spurred by a Fed pivot and easing financing conditions. As a result, the Russell 2000 briefly outperformed the S&P 500 during that period.

“This time around, the backdrop could be the softening activity momentum, as seen in a notable fall in US CESI most recently, into negative territory,” strategists wrote in a Tuesday note.

“If bond yields are falling as economic growth is moderating, the sector leadership is likely to be more Defensively tilted. Indeed, in Q2 so far, Defensives are ahead in both the US and in Europe,” they added.

The current market environment, marked by falling bond yields and softening activity momentum, supports this defensive tilt.

The strategists believe that utilities and real estate sectors are particularly likely to rebound, regardless of bond yield movements. Despite recent uptrends, these sectors remain attractive based on valuation metrics, with utilities being the top-performing defensive sector in the US.

In addition to defensive stocks, the bank also recommends a barbell strategy that revolves around commodity stocks. To be more specific, JPMorgan said its commodity strategists are bullish about industrial commodity prices for the second half of the year, “which should support Miners’ earnings per share,” the note states.

In terms of large versus small-cap stocks, JPMorgan maintains a cautious stance on small caps, particularly in the US, where they expect them to necessitate a series of rate cuts to rally. However, they see potential in European and UK small caps after the start of rate cuts in those regions.

Investing.com — The price of Bitcoin fell slightly on Tuesday, while a rally in no.2 token Ether cooled, as anticipation over key inflation data this week kept traders largely averse to assets like crypto that are perceived as riskier.

Hype over the approval of exchange-traded funds that directly track Ether also took a back seat while the Securities and Exchange Commission engages with fund managers over their applications to list such products. 

Last week, the SEC approved applications from major exchanges to list a spot Ether ETF, triggering a sharp rally in the token and broader crypto markets.

Bitcoin had fallen by 0.5% in the past 24 hours to $68,289.3 by 09:08 ET (13:08 GMT). Ether sank 0.4% to $3,899.26, retreating from two-month highs touched over the weekend.

Fears of higher-for-longer U.S. interest rates remained squarely in focus, especially ahead of the release of the monthly personal consumption expenditures (PCE) price index on Friday.

The reading is the Federal Reserve’s preferred inflation gauge, and is likely to factor into the central bank’s outlook on rates.

Sentiment towards crypto and other risk-driven assets was dented by growing suspicions that the Fed is in no rush to bring rates down from more than two-decade highs. A string of officials from the central bank have recently flagged that they need to see more proof inflation is sustainably cooling toward their 2% target before rolling out any cuts.  

The notion has kept Bitcoin comfortably within a trading range established over nearly three months, and has also limited bigger gains in Ether.

High rates bode poorly for speculative assets such as crypto, given that they limit liquidity that can be invested in the space, and also push up the attractiveness of conventional, low-risk investments such as the U.S. dollar and Treasuries. 

Ambar Warrick contributed to this report.

Investing.com — The Federal Reserve is taking a careful approach to the prospect of interest rate cuts, even as U.S. inflation is likely to slow in the coming months, according to analysts at Macquarie on Tuesday.

In a note to clients, the analysts said that there has been “no lack of cautious banter” from the Fed in recent days.

Several officials have said that they would like to see more evidence that price gains in the U.S. are cooling back toward their stated 2% target before they will begin to bring borrowing costs down from more than two-decade highs.

Minneapolis Fed President Neel Kashkari echoed this sentiment in an interview with CNBC on Tuesday, telling the business news channel that the central bank should wait for more substantial progress on inflation before considering cuts.

“I’m not seeing the need to hurry and do rate cuts, I think we should take our time and get it right,” he told CNBC.

Although the Macquarie analysts said they believe the Fed will eventually be persuaded to ratchet down interest rates due to rent-related costs over the next few months, it “seems pretty inevitable” that the central bank will raise its estimates for so-called “R-star” — the estimated rate that could prevail when the economy is strong and inflation stable.

The analysts added that they expect the U.S. dollar will be kept from “rallying more” as the Fed’s caution diverges with “a relatively impestuous” European Central Bank. Unlike the Fed, ECB officials have largely signaled that they are set to begin a cycle of rate easing at its upcoming meeting in June, with Governing Council member Francois Villeroy even suggesting that a follow-up cut could come as soon as July.

UBS updated its outlook for silver prices, projecting further growth due to robust industrial demand and a potential undersupply in the market.

The financial services firm increased its silver forecasts by $4 per ounce across various future dates, anticipating the metal to reach $34 per ounce by the end of September, $36 per ounce by the end of 2024, and maintain that level through the end of March 2025.

Moreover, UBS introduced a new forecast for the end of June 2025, setting the target at $38 per ounce.

At the time of writing, silver futures (July 2024 contracts) are trading at $31.72.

Silver’s recent performance has been very strong, especially in May when it outperformed gold. This has caused the gold-to-silver ratio to drop to its lowest point since December 2022.

Despite a recent pullback in prices due to strong U.S. economic data and a hawkish tone from the Federal Reserve, UBS expects silver’s outperformance to persist, projecting the ratio to narrow further to around 70 by 2025.

“So, why are we raising our price forecasts? According to the Silver Institute, total industrial demand is expected to rise by 9% to 711 mn oz, driven by demand from the photovoltaic sector, which is estimated to rise by 20% y/y to 232 mn oz,” analysts said.

On the supply side, challenges are anticipated, with mine production likely to fall by 0.8% to 823.5 million ounces due to temporary mine shutdowns in Peru.

UBS predicts a substantial shortfall in the silver market, estimating an undersupply of 215.3 million ounces for the year, which equates to 17% of the annual global demand. This deficit is expected to contribute to the metal’s price appreciation. 

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Just to name a few other stocks in our May list gaining big:

Vistra Energy Corp (NYSE:VST) +32.9% in May.
NAPCO Security Technologies (NASDAQ:NSSC) +25% in May.
Perficient Inc (NASDAQ:PRFT) +56.2% in May.

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MARA was one of the greatest winners from the Ethereum rally early last week and should likely keep on profiting from higher interest in the sector. The technical setup for the stock also shows great promise, possibly presenting a dip-buying opportunity when the stock starts the day lower today.

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Investing.com — U.S. stocks traded in a mixed manner Tuesday, at the start of a holiday-shortened week with the focus on more cues on interest rates from key inflation data due later in the week.

At 09:35 ET (13:35 GMT), Dow Jones Industrial Average fell 21 points, or 0.3%, while S&P 500 climbed 8 points, or 0.1% and NASDAQ Composite rose 85 points, or 0.5%.

Investors have returned after the Memorial Day holiday, and volumes are set to pick up this week with a barrage of key economic readings, including the Federal Reserve’s preferred inflation gauge. 

PCE inflation test due this week 

Attention this week will focus on the release of PCE price index data on Friday, widely seen as the inflation release that the Federal Reserve concentrates on. 

The reading is likely to factor into the central bank’s outlook on interest rates, and will be closely watched after a string of Fed officials warned that sticky inflation will delay any plans to loosen monetary policy.

This saw traders begin pricing out expectations for a rate cut in September. The CME Fedwatch tool shows traders pricing in a 50.7% probability the central bank will keep rates steady, along with a 43.6% chance of a 25 basis point rate cut.

Friday’s PCE reading is expected to show some cooling in inflation. But inflation is also set to remain well above the Fed’s 2% annual target range. 

The economic calendar also features revised data on first quarter economic growth on Thursday and the Fed’s Beige Book on Wednesday, while investors will also get the chance to hear from several Fed speakers during the week including Governor Michelle Bowman, Cleveland Fed President Loretta Mester, Governor Lisa Cook, New York Fed President John Williams and Atlanta Fed President Raphael Bostic.

May promises strong gains 

Stocks are on track to end May on a strong note, as better-than-expected quarterly earnings reports lifted sentiment, while cooler inflation data suggested rate cuts could come earlier than investors had anticipated.

The S&P 500 has advanced 5.3%, the Nasdaq Composite has rallied about 8%, and the Dow Jones Industrial Average has gained 3.3%, after topping 40,000 for the first time ever this month.

The quarterly earnings season is gradually coming to a close, but there are still several companies on deck this week, including Costco Wholesale (NASDAQ:COST), Salesforce (NYSE:CRM) and Ulta Beauty (NASDAQ:ULTA).

Elsewhere, Nvidia (NASDAQ:NVDA) stock rose over 4%, with the tech giant’s market value surpassing $2.5 trillion since its quarterly results, solidifying its position as the third most valuable company on Wall Street.

Apple (NASDAQ:AAPL) stock gained over 1%, after the iPhone maker’s smartphone shipments in China were 52% higher in April than a year ago, according to data from a research firm affiliated with the Chinese government.

GameStop (NYSE:GME) stock rose 15% after the video game retailer said it raked in more than $933 million from the sale of 45 million shares.

On the flip side, DraftKings (NASDAQ:DKNG) and Flutter Entertainment (NYSE:FLUT) both traded sharply lower after the Illinois Senate passed a bill that includes a sports-betting tax hike.

Crude market awaits OPEC+ meeting

Crude prices edged higher, rebounding from recent losses ahead of a meeting by major producers to decide future output levels.

By 09:35 ET, the U.S. crude futures (WTI) inched up 2.1% to $79.35 a barrel, while the Brent contract traded 0.7% higher at $83.44 per barrel.

Oil prices rose over 1% on Monday in muted trade owing to public holidays in the U.K. and the U.S., after sinking to the lowest levels since early-February last week.

All eyes are now on the next meeting of the Organization of the Petroleum Exporting Countries and allies, together called OPEC+, which is set to take place online on June 2. Much of the focus will be on whether the cartel will extend its current voluntary production cuts of 2.2 million barrels per day into the second half of the year.

(Ambar Warrick contributed to this article.)