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Market Overview Amid Global Political Tensions
Global markets displayed resilience on Thursday as investors navigated a week filled with significant political events in the U.S., France, and Britain. The U.S. is gearing up for a debate between President Joe Biden and former President Donald Trump, signaling the start of November’s election campaign with another debate on the horizon for September. Meanwhile, France is preparing for a snap parliamentary election on Sunday, and British voters will head to the polls next Thursday. Despite the political noise, the S&P500 hovers near record highs, having risen more than 17% year-to-date.
Market volatility remains subdued, with the VIX below 13, though November VIX futures at 17.4 have eased this week. French and British stocks showed minor declines.
Bond Markets React to Inflation and Debt Sales
U.S. Treasury yields reached two-week highs amid persistent inflation concerns from Australia and Canada, coupled with a packed schedule of new debt sales. French 10-year yields and debt spreads over Germany also saw upward movement. Investors are keenly awaiting Friday’s U.S. PCE inflation report, however, they must first navigate the latest jobless update and first-quarter GDP revision due on Thursday.
Dollar Strengthens, Yen and Yuan Wobble
The dollar remains strong globally, especially against the Japanese yen, which hit its weakest level since 1986 at just under 161 per dollar. The yen managed to stabilize slightly to about 160.50 after Japanese officials hinted at possible intervention. The euro and sterling have recovered some lost ground ahead of the upcoming political events.
In Sweden, the central bank kept its key interest rate at 3.75%, indicating potential further cuts if inflation remains stable. China's yuan steadied after hitting new year-lows, while Chinese stocks continued to fall, with the CSI300 index down again due to slower industrial profit growth in May.
Wall Street and Corporate Developments
On Wall Street, individual stocks experienced significant movements. Nvidia and Micron Technology saw declines amid concerns over AI stock valuations and disappointing forecasts. Amazon's shares surged, pushing its market value above $2 trillion. Rivian's stock soared following Volkswagen's $5 billion investment announcement, and Whirlpool saw a sharp rise after reports of a potential bid from Robert Bosch.
Federal Reserve Stress Test Results
The Federal Reserve's annual "stress test" revealed that major U.S. banks possess sufficient capital to endure severe economic stress. The test noted increased hypothetical losses due to riskier portfolios but confirmed that 31 big banks would remain capable of lending even amid heightened unemployment and market volatility.
Political Unrest in Bolivia
In South America, Bolivia faced political turmoil as armed forces pulled back from the presidential palace following an alleged coup attempt. President Luis Arce called for international support, and a general was arrested amid the unrest.
Upcoming Economic Data and Events
Investors can look forward to several key developments on Thursday that may influence U.S. markets. These include weekly jobless claims, May’s durable goods orders, trade balance, wholesale/retail inventories, pending home sales, first-quarter GDP revision, and the Kansas City Fed's business surveys. Also on the agenda are Mexico’s jobless and trade data, a policy decision by Mexico's central bank, a briefing by the IMF's Kristalina Georgieva, an EU summit in Brussels, and the sale of $44 billion in 7-year U.S. Treasury notes. Corporate earnings reports from Nike, Walgreens Boots Alliance, and McCormick are also anticipated.
