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Dow hits a one-week high amid bank’s rebound, rates jump

US big banks

The sector rotation led to a mixed close on Wall Street as financial stocks rose sharply after big banks passed the stress test, lifting Dow, while the tech shares lost steam, pressing on Nasdaq. All the big US bank stocks were higher, with JPMorgan Chase rising 3.5%, Wells Fargo jumping 4.5%, and Bank of America up 2.1%. The US first-quarter GDP growth was revised much higher to 2% from the previous estimate of 1.3%, and the jobless claims posted the biggest drop in 20 months. Strong economic data almost confirmed another rate hike by the Fed in July and sent treasury yields soaring. The upcoming US PCE data will provide more clues about the country's inflation trajectory, with an expectation that core inflation may stay sticky.

The US dollar strengthened due to a jump in rates, with USD/JPY rising for the fifth session in a row to a fresh 7-month high. The Chinese yuan continued to be under pressure as the PBOC’s intervention was in doubt, accelerating a selloff in the currency against the USD dollar and the Eurodollar due to central banks’ diverging policy stance. Biden’s consideration of banning AI chip exports to China slashed major Chinese tech shares, pressuring on Hong Kong stock market. The Chinese manufacturing PMI for May will be on close watch in the Asian session today. 

Futures are pointing to a mixed open across Asian equity markets. The Straits Times Index is up 0.31%, the Hang Seng Index futures fell 0.22%, and the Nikkei 225 slid 0.09%. 

Price movers:

  • 8 out of 11 sectors in the S&P 500 finished higher, with financial, material, and energy, leading gains, up 1.67%, 1.27%, and 1.11%, respectively. Defensive sectors, such as consumer staples and utilities, underperformed, down 0.15% and 0.05%, respectively. The communication services sector was the laggard, down 0.63%, dragged by Meta Platforms.  
  • Nike’s shares slipped 3% in after-hours trading due to a miss on earnings expectations in the fiscal fourth quarter. The sneaker maker’s earnings per share were at US$0.66, lower than an estimated US$0.67. And the revenue was at US$12.83 billion, topping Wall Street’s estimate of US$12.59 billion. Nike’s profit margin fell due to higher production, freight, and logistics costs.
  • US-listed Chinese shares extended losses amid intensifying US-China geopolitical tensions. The recent Biden Administration’s pending decision on the AI chip export ban to China may mark a new round of the heating AI race between the two countries. China’s uneven economic development added to the downward pressure on the regional stock markets. Baidu slid 5%, JD.com slumped 2.3%, and Alibaba’s shares fell 1.3% on the US stock markets.

SGX announcements/news:

  • No major news or announcements.

Today’s agenda:

  • Tokyo Core CPI for June y/y
  • China’s manufacturing and non-manufacturing PMI for May
  • US Core PCE Price Index for May

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