Asian Stocks Eye Higher Open After Fresh US Record: Markets Wrap

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(Bloomberg) — Asian equity markets are poised to gain Thursday after the world’s largest technology companies helped send US shares to fresh all-time highs.

Futures on stock benchmarks in Australia, Japan and Hong Kong all pointed to higher opens. The S&P 500 notched its 25th record close this year while the tech-heavy Nasdaq 100 climbed 2%. Nvidia Corp. — the poster child of the artificial-intelligence frenzy — led a rally in the “Magnificent Seven” megacaps to top $3 trillion in value. 

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Treasury yields fell on Wednesday with traders almost fully pricing in two Federal Reserve rate cuts in 2024. The dollar was mixed against its major peers, while the yen and the Swiss franc underperformed as risk sentiment improved.

“We believe US stocks are likely to remain supported as the year progresses,” said Solita Marcelli at UBS Global Wealth Management. “In addition to a strategic allocation to the tech sector, we see a particular opportunity in small-cap stocks supported by the beginning of the Fed’s easing cycle.”

As traders awaited this week’s US jobs report, a private payrolls reading on Wednesday showed hiring at companies grew at the slowest pace since the start of the year. Meantime, the services sector expanded by the most in nine months, powered by the largest monthly gain in a measure of business activity since 2021.

The loonie fell after the Bank of Canada became the first Group of Seven central bank to kick off an easing cycle, cutting interest rates on Wednesday and signaling more may follow. The euro edged lower, ahead of the European Central Bank’s policy decision. While policymakers are widely expected to cut rates, traders will be looking for guidance on the path forward, notably from President Christine Lagarde at the press briefing.

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In Asia, Indian markets will be in focus after Prime Minister Narendra Modi won backing from two key allies in his coalition, allowing him to form a government.

Elsewhere, Bitcoin topped $71,000. Oil rebounded from a four-month low as traders tried to establish a price floor after several days of declines. West Texas Intermediate settled near $74 per barrel after five straight sessions of losses. Meanwhile, Saudi Aramco lowered prices for all of its oil to Asia next month, the first reduction since February, amid concerns over the strength of demand in its biggest market.

Wall of Money

Goldman Sachs Group Inc.’s Scott Rubner noted a “wall of money” from passive equity allocations will pour into the stock market in early July, setting up a continuing rally through the early summer.

Since 1928, the first 15 days of July have been the best two-week trading period of the year for equities, and they tend to fade after July 17, according to Rubner. The S&P 500 has been positive for nine straight Julys, posting an average return of 3.7%. The Nasdaq 100 has an even better record, posting gains in 16 straight Julys, with an average return of 4.6%, he noted. 

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With earnings season basically over, the focus now turns back to the macro data — and that may impact stocks near-term, according to Gillian Wolff at Bloomberg Intelligence.

The Bloomberg Intelligence Market Pulse Index, a sentiment gauge that acts as a contrarian signal, advanced within striking distance of “manic” territory last month. It’s a rare sign that has typically tempered US stock returns in the short-run. In the three months following a manic reading, the Russell 3000 Index has gained an average 1.7%, compared with 9.1% after panic.

With the Fed widely expected to stay on hold next week, the focus of the meeting will be the new Summary of Economic Projections. Back in March, Fed officials maintained their outlook for three rate cuts in 2024.

“The ‘dots’ are likely to cluster around one or two interest rate cuts this year,” said Stephen Brown at Capital Economics. “Nevertheless, as inflation falls a bit faster than officials expect and GDP growth disappoints, our base case remains that the Fed will cut in September.”

Corporate Highlights:

• CrowdStrike Holdings Inc. delivered first-quarter earnings that beat Wall Street’s expectations, despite a pullback in spending that has challenged its cybersecurity rivals.
• Boeing Co. finally launched its space taxi into orbit with NASA astronauts on board, and is on target to dock with the International Space Station on Thursday.
• Alphabet Inc. named Eli Lilly & Co. executive Anat Ashkenazi as its new chief financial officer, replacing Ruth Porat who announced last year she planned to step down.
• Discount retailer Dollar Tree Inc. is reviewing options for its troubled Family Dollar business, including a potential sale or spinoff.
• A top Senate Republican is asking a government watchdog to investigate nearly $1.7 billion in financing offered last month to hydrogen company Plug Power Inc., alleging potential conflicts of interest and risks to US taxpayers.
• ASML Holding NV became Europe’s second-biggest listed company, overtaking LVMH by market value for the first time ever.

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Key events this week:

• Eurozone retail sales, ECB rate decision, Thursday
• US initial jobless claims, trade, Thursday
• China trade, forex reserves, Friday
• Eurozone GDP, Friday
• US unemployment rate, nonfarm payrolls, Friday

Some of the main moves in markets as of 6:54 a.m. Tokyo time:

Stocks

• Hang Seng futures rose 0.5% as of 6:54 a.m. Tokyo time
• S&P/ASX 200 futures rose 0.5%

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at $1.0871
• The Japanese yen was little changed at 156.06 per dollar
• The offshore yuan was unchanged at 7.2593 per dollar
• The Australian dollar was little changed at $0.6649

Cryptocurrencies

• Bitcoin fell 0.2% to $71,093.49
• Ether fell 0.3% to $3,853.5

Commodities

• Spot gold rose 1.2% to $2,355.32 an ounce

This story was produced with the assistance of Bloomberg Automation.

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