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Fed’s hiking suspension ignites risk-on sentiment, Apple & Microsoft hit new highs

Microsoft

Wall Street again switched on risk-on turbo, with three benchmark indices up more than 1% one day after the Fed paused rate hikes after 10 consecutive increases. Mega-cap tech companies again fuelled the rally, with both Apple and Microsoft hitting record highs. Meta Platforms jumped 3% to the highest level since early February 2022. The other sectors also caught up with gains, particularly in industrial stocks as a drop in the US dollar buoyed commodity prices in general.

The US dollar fell following a slump in the US bond yields, suggesting investors anticipate the hiking cycle may end sooner than what Fed Chair signalled. The CME FedWatch Tool projects a probability of 67% for the Fed to hike the rate by 25 basis points and no more hikes afterward this year. And a surge in the Eurodollar also pressed on the USD after the ECB’s 25 basis points rate hike.

The Chinese stock markets continued to rally amid the government’s supportive policy, with the Hang Seng Index up 2.2% to a one-month high, leading Asian markets to open higher. ASX 200 futures were up 0.41%, Nikkei 225 rose 0.06%, and Hang Seng Index futures rose 0.70%. All eyes will be on the Bank of Japan’s policy meeting today.

Price movers:

  • All 11 sectors in the S&P 500 finished higher, with Telecommunication Services leading gains, up 1.54%, followed by Healthcare (+1.55%) and Industrials (1.51%). At the same time, Tesla and Nvidia’ s rally took a breather, down 0.37% and 0.79%, respectively.   
  • Mediterranean restaurant chain Cava stocks surged 117% on the market debut. The company priced its IPO at US$22 per share and sold 14.4 million shares, giving a market value of US$4.88 billion. The stock closed at US$43.78 per share.
  • The Chinese e-commerce giant, Alibaba, plans to launch a local version of Tmall in Europe, taking a further step toward its international expansion. Currently, the company lists goods in AliExpress with shipments from China. Alibaba’s shares jumped 3% amid the broad rally.
  • The Eurodollar soared 1.04% against the USD after the ECB raised the interest rate by 25 basis points to 3.5% at a 22-year high despite a sharp decline in the region’s inflation. The EU’s headline inflation dropped to 6.1% and the core inflation fell to 5.3% in May, which was still well above the 2% target.
  • Gold snapped a four-day losing streak amid weakened USD. The precious metal may set to rise if the softness in the king dollar persists. A bullish breakout of the recent potential resistance of 1,980 may take it to test the all-time high level of above 2,070 again.
  • Crude oil jumped on positive Chinese refinery data and a softened USD, with the WTI future bouncing back to above US$70 per barrel again.  

ASX and NZX announcements/news:

No Major announcement.  

Today’s agenda:

  • BOJ’ s Policy Meeting

 


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