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Markets Mixed Ahead of US Interest Rate and Inflation Rate Data

Published 2024/06/12, 08:16

The rand strengthened for a second consecutive session on Tuesday, whereas the JSE ended slightly lower as investors anticipated the commencement of the US Federal Reserve’s (Fed) two-day policy meeting. The Federal Open Market Committee (FOMC) will reveal the interest rate decision when its meeting concludes this evening. Additionally, the central bank will publish its latest economic projections and interest rate outlook. The US consumer inflation report for May is also scheduled for release this afternoon.

On Tuesday, the S&P 500 and the Nasdaq rose by 0.30% and 0.90%, respectively, reaching new record highs, while the Dow Jones dropped by 120 points. Stocks recovered earlier losses after a decline in bond yields spurred speculation that Wednesday’s inflation report could bolster the argument for the Fed to cut rates this year. While the Fed is anticipated to keep rates steady tomorrow, investors will be keenly observing for indications of when the first-rate cut might occur. Financials and industrials were the poorest performers, whereas the technology sector saw gains. Apple shares (NASDAQ:AAPL) surged by 7.20% to a record high, following the announcement of new AI features aimed at enhancing the appeal of its devices.

Concerns over political unrest in France caused European equities to continue losing ground on Tuesday for the third session. The Stoxx 50 and the Stoxx 600 fell by nearly 1%. The rise of the far-right in the European Parliament election prompted French President Macron to call for an early parliamentary election. Macron's capacity to get laws passed may be influenced by the results of the election and the choice of a new prime minister, even though he will still be president and have control over defence and foreign policy. Fears regarding France's financial predicament have also been raised by the possibility that the President would step down if his party does poorly in the next elections.

Following advances on Wall Street, the Nikkei climbed 0.25% to close at 39 135 on Tuesday, marking the second straight day of gains as technology firms drove equities markets higher. This week's policy announcement from the Bank of Japan (BoJ), the most recent interest rate decision from the Fed, and the US consumer inflation statistics are all anticipated by investors. Japan's economy shrank less than anticipated in the first quarter, according to figures released on Monday, while the nation's current account surplus in April exceeded projections.

In commodities, crude futures remained around $78 per barrel on Tuesday, following a nearly 3% increase in the previous session, driven by anticipated higher fuel demand this summer. Gold prices stabilised near $2 310 per ounce, hovering close to one-month lows as investors awaited US inflation data and the Fed's policy announcement later in the week. Traders will be closely watching for signals on when the Fed might start cutting rates, especially after last Friday's stronger-than-expected payroll report.

PSG Wealth Daily Investment Update, 12 June 2024

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