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US stocks rally broadly as optimism builds on the upcoming CPI

stock markets

The US stock markets extended gains ahead of the key inflation data as investors bet for another sharp decline in the US CPI, which may let the Fed end its rate hike cycle sooner. The US headline inflation printed at 4% in May, and consensus calls for a further decline to 3.1% in June. While the core inflation may stay high above 5%, a hotter-than-expected CPI could cause a swift pullback in the markets. However, there are lots to reassess as Wall Street is running into the earnings season.

Dow started outperforming Nasdaq as financials and industrials stocks picked up gains, while big tech shares slowed rising. All big banks, including JP Morgan Chase, Citigroup, and Wells Fargo, finished higher ahead of their earnings reports this Friday.  

Asian markets are set to open higher after a strong finish amid Wall Street’s optimism. The Chinese government rolled out more pro-growth policies, which also fuelled the rally. The Reserve Bank of New Zealand is expected to pause its rate hikes after 12 consecutive increases later today. The ASX 200 futures were up 0.50%, the Hang Seng Index futures rose 0.62%, and the Nikkei 225 futures climbed 0.16%. 

Price movers:

  • 10 out of 11 sectors finished higher in the S&P 500, with Energy leading gains, up 2.2%. Financials, Industrials, and Utilities were also strong, all up about 1.2%. Healthcare was the laggard, finishing flat.  
  • Activision Blizzard’s shares soared 10% on optimism toward Microsoft’s takeover deal. A federal judge denied the Federal Trade Commission’s’ motion for a preliminary injunction to block Microsoft’s acquisition of the gaming company.
  • Coinbase jumped for the fifth straight trading day to an eleven-month high amid a potential approval of a Bitcoin ETF by the SEC. The CBOE filed for amendments for five Bitcoin ETF applications, confirming an agreement has been reached with the crypto exchange on surveillance sharing agreements.
  • Apple launched an online store on Tencent’s WeChat messaging app in China, allowing users to buy Apple products, marking another expansion to China’s online retailer. The Apple store is in the form of Mini Program. Orders are eligible for free shipping.
  • The US dollar index slumped for the fourth straight trading day, suggesting that markets believe that the Fed is very near to ending a rate hike cycle. This, however, pushed commodity prices higher, with gold futures extending a three-day winning streak. Crude oil rose to a six-week high on tightened supply, a softened US dollar, and China’s further stimulus measures.

ASX and NZX announcements/news:

  • KMD Brads (ASX/NZX: KMD provides guidance for the full year ending 31 July 2023. Sales are expected to be approximately NZ$1.1 billion, the first time exceeding NZ$1 billion. Gross margin remains resilient, and underlying EBITDA is forecast to be NZ$105 million to $110 million.

Today’s agenda:

  • RBNZ Rate Decision
  • RBA Governor Phillip Lowe Speaks
  • US CPI for June
  • BOC Rate Decision

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