Stocks Bask in Nvidia's Glow, Dollar Remains Steady
Global stocks hit record highs on Wednesday, driven by a surge in tech shares, making AI chipmaker Nvidia the world's most valuable company. This rise comes amidst soft U.S. retail sales data suggesting possible rate cuts this year.
Tech Shares Surge
MSCI's All-World index gained 0.15%, reaching an all-time high of 805.43. The boost was largely due to a jump in U.S. tech stocks on Tuesday, allowing Nvidia to surpass Microsoft and elevate shares in Asian chipmakers. U.S. stock index futures also saw an uptick, with the tech-heavy Nasdaq futures up 0.23% and S&P 500 futures rising by 0.1%.
European Markets and British Inflation
In Europe, the stock indexes held steady, with a minor 0.1% dip. The British pound gained strength after inflation data showed it hit the Bank of England's 2% target in May for the first time since 2021. This fall in inflation is good news for both Prime Minister Rishi Sunak and the BoE, although it might be too late to influence the upcoming elections or change central bank policies.
Rate Cut Hopes in the U.S.
Data from Tuesday indicated that U.S. retail sales barely rose in May, with prior months' figures revised downward, suggesting lukewarm economic activity in the second quarter. This led to an increase in rate-cut expectations for September, with traders now pricing in a 67% chance of a cut, compared to 61% the previous day. Markets are forecasting a total of 48 basis points in cuts this year.
"The Fed will need more data to back a rate cut," Vasu Menon from OCBC says. While U.S. inflation readings were mild last week, supporting a cautious stance, rate cuts are more likely in 2025, keeping markets hopeful for more significant easing over the next two years.
Dollar and Yen Scenario
The U.S. dollar held steady at 105.19, with the Japanese yen remaining mostly unchanged at 157.92. The yen has lost a third of its value against the dollar in the past 4.5 years due to different interest rate policies between Japan and the U.S. Minutes from the Bank of Japan's April meeting revealed discussions on the weak yen's impact on prices, with some policymakers indicating possible earlier-than-expected rate hikes if inflation rises.
Oil Prices on the Rise
In the commodities market, oil prices saw an increase. Brent crude futures rose 0.6% to $85.80 a barrel, while U.S. crude futures gained 0.48%, trading at $81.96.
This upswing across different sectors and regions illustrates how interconnected global economies are, and how market sentiments can be influenced by a combination of data and policy signals.
