U.S. futures and European stocks saw fluctuations as the rally in mega-cap stocks, which had brought the S&P 500 to the brink of a bull market, showed signs of fading.
Apple Inc., Alphabet Inc. and Microsoft Corp. were expected to continue their decline in premarket trading, suggesting the tech rally was losing momentum. In contrast, Danske Bank A/S saw a notable rise, contributing to the excellent performance of the European financial sector, following a rotation into US financial stocks the previous day.
The technology industry faces challenges due to the possibility of central banks maintaining higher interest rates for a longer period. This has dashed hopes of rate cuts later in the year, negatively impacting the momentum of mega-cap stocks. The Federal Reserve and European Central Bank are scheduled to make policy decisions next week, with the Fed signaling a possible pause in June before resuming rate hikes.
Karen Ward, chief EMEA market strategist at JPMorgan Asset Management, expressed concern about the rates market’s over-optimism regarding central banks’ ability to cut rates quickly. She believes the price of expected rate cuts poses a risk to valuations of growth-oriented mega-cap tech companies.
European stocks were also volatile, with the OECD warning of a weak recovery in the global economy due to persistent inflation and restrictive central bank policies. Additionally, disappointing data on Chinese exports raised further doubts about global demand.
Hermes International washed out the benchmark Stoxx 600 index and was expected to fall for the third straight session. Confidence in the reopening of Chinese trade has declined, especially affecting sectors such as luxury goods.
Craig Erlam, senior market analyst at Oanda, noted the rapid fading of China’s reopening momentum and predicted increased pressure on leaders to implement new stimulus measures to revitalize the economy.
Shares in Danske Bank rose as much as 7.2% after the bank raised its profitability target and committed to paying dividends, signaling a desire to overcome a turbulent period marred by scandals. Inditex SA also saw a significant rise, with its biggest jump in a year, boosting the retail sector due to better-than-expected profits from the owner of Zara.
The FTSE 100 stabilized after initially falling when British lender Halifax reported the first annual drop in house prices since 2012. However, builder Persimmon Plc. fell up to 2.3%.
In currency markets, the Turkish lira fell to a record low against the dollar, falling approximately 7%. This drop came as authorities hinted that they would reduce interventions to support the currency. The appointment of former Merrill Lynch strategist Mehmet Simsek as the new Treasury and Finance Minister raised expectations of a return to orthodox monetary policy, which could reduce market interventions.
An indicator of the strength of the US dollar declined and Treasury yields rose slightly following the announcement of a Treasury bill auction, which weighed on short-term US bonds.
The Securities and Exchange Commission expanded its crackdown on cryptocurrencies by accusing Coinbase Global Inc. of running an illegal exchange. This move could have implications for industry operations and the ability of U.S. citizens to do business. As a result, Bitcoin saw a slight drop.
In the commodities market, gold prices fell slightly, while oil fluctuated after losing earlier gains triggered by news of Saudi Arabia’s supply cut.
Key events to watch this week include US trade and consumer credit data, Canada’s rate decision, EIA crude oil inventory data, Eurozone GDP, rate decisions in India and Peru, Japan’s GDP, US wholesale inventories and initial jobless claims, as well as China’s PPI and CPI data.
These are the main market movements:
Stocks
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S&P 500 futures rose 0.1% as of 7:51 a.m. New York time.
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Nasdaq 100 futures rose 0.1%.
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Dow Jones Industrial Average futures were relatively unchanged.
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The Stoxx Europe 600 rose 0.1%.
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The MSCI World index was little changed.
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The MSCI Asia Pacific Index saw minimal movement.
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The MSCI Emerging Markets Index rose 0.7%.
Coins
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The Bloomberg Dollar Spot Index fell 0.2%.
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The euro rose 0.2% to $1.0715.
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The pound rose 0.3% to $1.2465.
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The Japanese yen rose 0.2% to 139.38 per dollar.
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The foreign yuan remained relatively stable at 7.1244 per dollar.
Cryptocurrencies
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Bitcoin fell 0.6% to $26,791.13.
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Ether fell 0.4% to $1,868.92.
Captivity
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The 10-year Treasury yield rose two basis points to 3.68%.
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The German 10-year bond yield was virtually unchanged at 2.37%.
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The UK 10-year yield fell one basis point to 4.20%.
Raw materials
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West Texas Intermediate crude rose 1.1% to $72.51 a barrel.
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Gold futures fell 0.2% to $1,977.50 an ounce.
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