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Wall Street kicks off the week on the front foot amid debt talks’ progress

Joe Biden

US stocks started the week on the front foot as the US debt ceiling negotiation progressed and buoyed risk-on sentiment, with the three benchmark indexes finishing higher. Cyclical sectors, such as financials and materials, rebounded, while growth stocks, typically in tech, continued to climb on Fed’s policy optimism.

The US dollar weakened against most of the other G-10 currencies, while commodity currencies, such as the Australian dollar, Canadian dollar, and New Zealand dollar, sharply rebounded following the comeback in energy and metal prices. The US bond yields went sideways in the last few sessions as bond traders may be reasserting the Fed’s policy path.

Chinese stock markets outperformed, with the Hang Seng Index up 1.75% on Monday, led by Chinese banking stocks, ahead of tech giants Baidu and Alibaba’s earnings report and a slew of influential economic data later this week. Asian markets are set to open higher, with the STI up 0.2%, the Hang Seng Index futures up 1.13%, and Nikkei 225 rising 0.71%.

Price movers:

  • 6 out of 11 sectors in the S&P 500 finished higher, with financials and materials stocks leading losses, up 0.82% and 0.85%, respectively. The technology sector also outperformed, up 0.74%. Defensive sectors, however, fell due to risk-on sentiment, with utility stocks leading losses, down 1.24%.   
  • EU approves Microsoft’s $69 billion acquisition of Activision Blizzard, clearing regulatory hurdles for the tech giant after the UK blocked the deal last month.  EU’s nod on the deal was subject to remedies allowing users to stream Activision games on any cloud streaming platform, aiming to dissolve concerns over antitrust issues.
  • EU’s executive arm raised inflation expectations to 5.8% in 2023, signaling to continue rate hikes and tightening credit conditions. The Eurodollar strengthened slightly against the USD, testing on the 50-day moving average of about 1.09.
  • Chinese tech shares jumped ahead of major earnings later this week, including Baidu and Alibaba. Alibaba’s US ADS rose 1.42%, and Baidu ADS was up 3.15% on the US markets. The broad-based rally was also fueled by optimism toward the Chinese government’s supportive policy, with the Shanghai Stock Exchange Financial Industry Symposium to be held this Wednesday, centering on “Promote the valuation and high-quality development of the financial industry while serving Chinese-style modernization.”
  • Crude oil rebounded amid a weakened USD and risk-on sentiment. The news that the US Department of Energy plans to buy 3 million barrels of crude oil for the SPR also added to the optimism. The double-bottom in the WTI futures is still in play, with its imminent resistance at the 50-day moving average of $75 per barrel.
  • Cryptocurrencies also rebounded swiftly after the intense selloff last week as the digital coin markets tend to trace big tech’s movements, which may also be considered a hedging tool against an economic downturn.

SGX announcements/news:

  • Singapore banks deliver strong earnings growth in Q1: Net interest margin growth for the big three Singaporean banks ranged from 75bp to 56bp while return on equity ranged from 14.7% to 18.9%.

Today’s agenda:

  • Westpac Consumer Sentiment for May and RBA Meeting Minutes.
  • China’s April Fixed Assets Investment, Industrial Production, Retail Sales, and Unemployment Rate. 

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