Stock markets sentiment remains volatile amid lingering fears of a global economic slowdown

by JustForex

US indices were positive yesterday. By the close of the stock market, the Dow Jones index (US30) gained 0.60%, and the S&P 500 index (US500) added 0.95%. NASDAQ Technology Index (US100) jumped by 1.51%.

The FOMC protocol confirmed that most participants are prone to raise rates by 50 basis points at their next two meetings, but after that, the Fed is likely to pause for a potential reassessment of the pace of tightening. The protocol also states that the Fed will begin cutting its balance sheet on June 1 at a rate of $47.5 billion per month.

Many may think that this is bad data for the US stock market, but it should be noted that the most aggressive scenario is always priced in. The FOMC minutes came as no surprise to analysts and investors, and with the Fed taking a pause after the summer rate hikes, the US stock market may see a short-term growth during this period.

US durable goods orders increased by 0.4% last month, less than the expected 0.6% and much lower than March’s +1.1%. According to Bloomberg, the numbers show that companies are sticking to their capital spending plans in an effort to boost productivity to ease the burden of high inflation and a tough labor market. However, it is unclear whether companies will reconsider the current pace of investment this year due to higher interest rates and the expected decline in economic activity.

Nvidia released a second-quarter outlook that fell short of expectations and overshadowed first-quarter results. NVIDIA stock lost 5.8% in the post-market.

Major European indices closed in the green territory yesterday. German DAX (DE30) gained 0.63%, French CAC 40 (FR40) added 0.73%, Spanish IBEX 35 (ES35) jumped by 1.49%, British FTSE 100 (UK100) increased by 0.51%. German GDP for the quarter rose by 0.2%, as expected.

The Eurozone Financial Stability Report showed that higher inflation and lower growth could increase market volatility and challenge debt servicing capacity as financing costs rise. Combined with a further war escalation, this will require a tighter monetary policy adjustment sooner than expected.

On Thursday, the UK Financial Conduct Authority said that the dual listing regime on the London Stock Exchange may be simplified to a single listing to attract more startups, . The UK wants to boost London’s appeal as a global listing destination as it continues to lag behind New York in bringing tech companies to market and faces increased competition from Amsterdam after Brexit.

Oil is slightly more expensive because of supply shortages and the growth of the US refining industry. Last week, US crude inventories decreased by 1 million barrels, while gasoline inventories were slightly down. Refineries have accelerated the pace of refining, increasing capacity utilization to 93.2%, the highest since December 2019.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) decreased by 0.26%, Hong Kong’s Hang Seng (HK50) added 0.29%, and Australia’s S&P/ASX 200 (AU200) increased by 0.37% by the end of the day.

The Central Bank of South Korea increased its benchmark interest rate by 25 basis points from 1.5% to 1.75%. Analysts expected the rate hike. The Bank of Korea also raised its year-end inflation forecast to 4.5% (the previous forecast was 3.1%, and the current inflation rate in Korea is 4.77%), and slightly lowered its GDP growth forecast to 2.7% from 3% previously.

Covid’s prolonged restrictions have hurt China’s economic outlook and prompted banks UBS Group AG and Goldman Sachs Group Inc to lower their growth forecasts for China this year. The impact on Shanghai’s economy has been dire. Last month, the city didn’t sell a single car, and its industrial production fell more than 20 times compared to the rest of the country. Shanghai intends to return to normal and fully restore factory production by mid-to-late June.

Main market quotes:

S&P 500 (F) (US500) 3,978.73 +37.25 (+0.95%)

Dow Jones (US30) 32,120.28 +191.66 (+0.60%)

DAX (DE40) 14,007.93 +88.18 (+0.63%)

FTSE 100 (UK100) 7,522.75 +38.40 (+0.51%)

USD Index 102.13 +0.27 (+0.26%)

• – US GDP (q/q) at 15:30 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US Pending Home Sales (m/m) at 17:00 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.