Round up of today’s market news

North American News

NASDAQ and S&P Indices Hit Record Highs

• Nvidia shares close with the market capitalization over $3 trillion.

The broader S&P and NASDAQ indices have closed at record highs, driven by significant gains in the tech sector. Leading the charge was Nvidia, which surged over $60, or 5.16%, to $1,224.40, pushing its market capitalization to $3.012 trillion, narrowly surpassing Apple’s $3 trillion. The only U.S. company with a higher market cap is Microsoft, standing at $3.15 trillion. Nvidia’s shares, set to split 10:1 on Monday, have climbed 28.2% since announcing earnings on May 22.

Today’s stock market rally is largely attributed to lower interest rates, with the 10-year Treasury yield dropping 34 basis points over the past week. Investors are closely watching the upcoming US jobs report, due on Friday. The market is speculating whether a weaker employment report might paradoxically be positive for stocks, as it could reinforce expectations of a Fed rate cut. Conversely, a stronger employment number could complicate the outlook, especially in light of the recent sharp decline in yields over the last five to six trading days.

This dynamic underscores the market’s sensitivity to economic data and interest rate trends, highlighting how intertwined macroeconomic indicators are with investor sentiment and market movements. As Nvidia and other tech giants continue to influence the broader indices, the interplay between economic reports and market expectations will be crucial in shaping the direction of the stock market in the near term.

Closing levels:

• Dow Industrial Average average rose 96.04 points or 0.25% at 38807.34.
• S&P index rose 62.69 points or 1.18% at 5354.04.
• NASDAQ index rose 330.86 points or 1.96% at 17187.90

The small-cap Russell 2000 rose 29.92 points or 1.47% at 2063.67.

US ISM May services PMI 53.8 vs 50.8 expected

• Latest data released by the Institute for Supply Management – 5 June 2024

• Prior 49.4

The key components:

• New orders 54.1 vs 52.2 prior
• Employment 47.1 vs 45.9 prior
• Prices paid 58.1 vs 59.2 prior

The other details:

• Production 61.2 vs 50.9 prior
• Deliveries 52.7 vs 48.5 prior
• Inventories 52.1 vs 53.7 prior
• Order backlogs 50.8 vs 51.1 prior
• New export orders 61.8 vs 47.9 prior
• Imports 42.8 vs 53.6 prior

US May final services PMI 54.8 vs 54.8 prelim

• Latest data released by S&P Global – 5 June 2024

• Prior 51.3
• Composite PMI 54.5 vs 54.4 prelim
• Prior 51.3

ADP national employment for May 152K versus 175K estimate

• Highlights of ADP national employment report for May 2024

• Prior month 192K revise to 188K
• National employment change for May xxxK vs 175K estimate
• Goods producing 3K vs 47K month
• Service providing 149K vs 145K last month
• Wages for job stayers 5% unchanged from prior month
• Wages for job changers -7.8% from 9.3% prior month. A lower number is indicative of a tighter jobs market

Details:

• small (less than 50 employees), -10K
• medium (50 – 499 employees) +79K
• large greater than 499 employees). 98K

By sector:

• Trade/transportation/ utilities +55K.
• Education/health services, +46K.
• Construction, +32K.
• Leisure/hospitality, +12K
• Manufacturing, -20K
• Financial activities +28K
• Professional and business services -6K
• Information, -7K
• Natural resources and mining, -9K
• Other services +21K

US MBA mortgage applications w.e. 31 May -5.2% vs -5.7% prior

• Latest data from the Mortgage Bankers Association for the week ending 31 May 2024

• Prior -5.7%
• Market index 180.4 vs 190.3 prior
• Purchase index 132.3 vs 138.4 prior
• Refinance index 432.1 vs 463.8 prior
• 30-year mortgage rate 7.07% vs 7.05% prior

Reuters poll: Federal to cut fed funds rate by 25 basis points in September 74 of 116 polled.

• 74 of 116 economists versus 70 of 108 in May

A Reuters poll on the Fed for June:

• Federal Reserve to cut Fed funds rate 25 basis points in September says 74 of 116 economists. That compares to 70 of 108 in the May poll
• Federal Reserve to cut rates by 50 basis points in 2024 says 68 of 116 economists. 28 say 25 basis points, 5 say no cut

BlackRock, Citadel Securities plan to start a new national stock exchange in Texas

• Wall Street Journal with the report

• A group backed by BlackRock and Citadel Securities is planning to start a new national stock exchange in Texas
• Aiming to take on what they see as onerous regulation at the New York Stock Exchange and Nasdaq
• The Texas Stock Exchange has raised approximately $120 million, plans to file registration documents with the Securities and Exchange Commission later this year
• goal is to begin facilitating trades in 2025 and host its first listing in 2026

Deutsche Bank analyst sees one 2024 Federal Reserve rate cut, “all the way in December”

• Deutsche Bank remains constructive on equities

Deutsche Bank’s chief global strategist Chadha spoke in a media interview (CNBC) on the Federal Reserve and US equities:

• said the firm is “constructive” on equities
• does not think a rate cut is needed for equities to continue to rise
• sees one rate cut from the Federal Open Market Committee (FOMC) this year, “but all the way in December”

S&P 500 to hit 5,500 in just three week’s time

• Analyst forecasts a strong rally for the US benchmark equity index by the end of June

Fundstrat Global Advisors Managing Partner and Head of Research, Tom Lee:

S&P 500 will rise 4% to a record 5,500 by the end of this month

Speaking in an interview with CNBC (gated). In brief, Lee citing:

• Inflation is coming in softer than expected and I think the job market is cooling, but not weakening dramatically.
• And I think that’s a good situation for equities.
• The sell-off in April actually hasn’t really been fully recovered. That’s why we expected a rebound in May, but I think that carries over into June.
• There’s still $6 trillion of cash on the sidelines and margin debt is still way below where it was in October of 2021, so we know investors really aren’t that long yet.
• So I think that comes together this month, with a pretty surprisingly robust move higher.

Q&A from Bank of Canada Press conference: Interest rate decisions are one meeting at a time

• Tiff Macklem and Carolyn Rogers answers questions after the BOC rate cut

• Interest rate decisions one meeting at a time. If the economy continues as expected and easing of inflation, you can expect more cuts
• Determined to get inflation back to 2% target
• The work is not done. See how things evolve.
• Will make decisions one meeting at a time depending on data
• We have come a long way with fight on inflation
• Economy has evolved broadly as we expected. That has increased our confidence that inflation will move gradually back toward a 2% target
• The timing of any further cuts is dependent on incoming data.
• We know there can be bumps along the way. There are risks.
• Our own forecasts has inflation moving gradually back toward our 2% target.
• There are limits to how far we can divert from us, and we are not close to those limits
• We are expecting population growth to slow. We have built in our forecasts. Population growth has eased employment pressures, but it also increase demand for housing.
• So far it is looking like a soft landing for the economy
• There is room for economy to grow faster than potential for a period..
• We are normalizing our balance sheet, but our policy is still restrictive.
• We need restrictive policy as inflation is still above target.
• We will get to a point where balance sheet is normalized
• Interest rate will notreturn to levels as low as they were before the Covid pandemic.
• In the past there have been periods of considerable diversions with the Fed

BOC Carolyn Rogers:

• It is clear there is some pent-up demand in the housing market. We’ll see how that goes.
• We always look on how decisions will impact Canadians and housing is an important part.
• The BOC is diverging from other countries because each economy is working at a bit differently

The press conference concludes at 11:08 AM ET.

Summary of the press conference:

Bank of Canada Governor Tiff Macklem emphasized that interest rate decisions will be made on a meeting-by-meeting basis, depending on economic data. If the economy and inflation continue to align with expectations, more rate cuts are likely. While progress has been made in combating inflation, aiming to bring it back to the 2% target, the work is not yet done.

The timing of further cuts will depend on incoming data, acknowledging potential risks and bumps along the way. Despite some limits on diverging from U.S. policy, the BoC forecasts gradual inflation reduction toward the target.

Population growth, which has eased employment pressures but increased housing demand, is expected to slow. The economy appears to be heading for a soft landing, with room for growth beyond potential for a period. Although the BoC is normalizing its balance sheet, the policy remains restrictive as inflation is still above target. Interest rates are not expected to return to pre-pandemic lows, and historically, there have been significant divergences with the Federal Reserve.

Bank of Canada lowers rates to 4.75% from 5.0%. Full statement from the Bank of Canada

• Bank of Canada interest-rate decision for June 2024

The Bank of Canada cut rates to 4.75% from 5.0% at its June 2024 interest-rate decision.

The full statement from the Bank of Canada:

The Bank of Canada today reduced its target for the overnight rate to 4¾%, with the Bank Rate at 5% and the deposit rate at 4¾%.The Bank is continuing its policy of balance sheet normalization.

The global economy grew by about 3% in the first quarter of 2024, broadly in line with the Bank’s April Monetary Policy Report (MPR) projection.In the United States, the economy expanded more slowly than was expected, as weakness in exports and inventories weighed on activity.Growth in private domestic demand remained strong but eased. In the euro area, activity picked up in the first quarter of 2024. China’s economy was also stronger in the first quarter, buoyed by exports and industrial production, although domestic demand remained weak.Inflation in most advanced economies continues to ease, although progress towards price stability is bumpy and is proceeding at different speeds across regions.Oil prices have averaged close to the MPR assumptions, and financial conditions are little changed since April.

In Canada, economic growth resumed in the first quarter of 2024 after stalling in the second half of last year. At 1.7%, first-quarter GDP growth was slower than forecast in the MPR. Weaker inventory investment dampened activity. Consumption growth was solid at about 3%, and business investment and housing activity also increased. Labour market data show businesses continue to hire, although employment has been growing at a slower pace than the working-age population. Wage pressures remain but look to be moderating gradually. Overall, recent data suggest the economy is still operating in excess supply.

CPI inflation eased further in April, to 2.7%.The Bank’s preferred measures of core inflation also slowed and three-month measures suggest continued downward momentum. Indicators of the breadth of price increases across components of the CPI have moved down further and are near their historical average.However, shelter price inflation remains high.

With continued evidence that underlying inflation is easing, Governing Council agreed that monetary policy no longer needs to be as restrictive and reduced the policy interest rate by 25 basis points. Recent data has increased our confidence that inflation will continue to move towards the 2% target. Nonetheless, risks to the inflation outlook remain.Governing Council is closely watching the evolution of core inflation and remains particularly focused on the balance between demand and supply in the economy, inflation expectations, wage growth, and corporate pricing behaviour. The Bank remains resolute in its commitment to restoring price stability for Canadians.

Canada labor productivity rate for Q1 -0.3% versus -0.2% last quarter

• Canada labor productivity rate for Q1 2024

• Prior quarter 0.2%
• Labor productivity rate -0.3% in Q1

Highlights and details:

Labour Productivity

• Labour productivity of Canadian businesses declined 0.3% in Q1 2024, following a 0.2% increase in Q4 2023.
• Productivity fell in half of the 16 industry sectors.
• Major contributors to the decline: manufacturing, professional services, and administrative services.
• Gains in productivity were observed in agriculture and forestry, accommodation and food services, and transportation and warehousing.

Business Output and Hours Worked

• Business output edged up 0.1% in Q1 2024, similar to the Q4 2023 increase.
• Hours worked increased by 0.4% in Q1 2024, after slight changes in the previous two quarters.
• Hours worked in services-producing businesses increased by 0.6%, while goods-producing businesses saw no change.
• Hours worked were up in 9 of the 16 industry sectors, stable in 4 (mining and oil and gas extraction, construction, retail trade, and transportation and warehousing).

Employment

• The increase in hours worked reflects 0.4% growth in the number of jobs, with unchanged average hours worked.

Unit Labour Costs

• Unit labour costs rose by 1.3% in Q1 2024, higher than the 0.2% increase in Q4 2023.
• The rise in unit labour costs was due to a 0.3% decline in productivity and a 1.0% increase in hourly compensation.

Commodities

Gold Prices Soar as Weak US ADP Report Sparks Fed Rate Cut Speculation

• Gold price is gaining 1.18% amid mixed US economic data
• US Dollar Index increases 0.22% to 104.7 but fails to curb Gold’s advance.

Gold’s price remains range-bound and advanced on Wednesday, making a U-turn to Tuesday’s price action following the release of mixed US economic data that could warrant lower borrowing costs set by the US Fed. Therefore, the Greenback rose, yet failed to put a lid on the yellow metal. Gold trades at $2,353, up 1.18%.

ISM showed the US economy continues to expand in its service sector, boosting both the Greenback and the golden metal.

The US Dollar Index, which tracks the Greenback’s performance against a basket of six currencies, rises 0.22% to 104.7.

The golden metal was also boosted by commodity prices stabilizing following Tuesday’s plunge, which witnessed a more than 4% drop during the first two days of the week. Additionally, upbeat PMI data from China hints that the economy might continue to grow.

Daily market movers: Gold capitalizes 

• US ISM Services PMI in May expanded by 53.8 to its highest level since August 2023, exceeding estimates of 50.8 and April’s 49.4.
• “Survey respondents indicated that overall business is increasing, with growth rates continuing to vary by company and industry,” wrote Anthony Nieves, ISM Services Business Survey Committee Chair.
• ADP Employment Change revealed that private US hiring in May rose by 152K, below estimates of 175K and missing April’s 188K.
• Last week, the US Core Personal Consumption Expenditure Price Index (PCE), the Fed’s preferred inflation gauge, stabilized, boosting hopes for potential rate cuts.
• Traders are currently pricing about a 57.4% chance of a rate cut in September
• The US economic docket during the week will feature Initial Jobless Claims for the previous week on Thursday, followed by May’s Nonfarm Payrolls on Friday.

Crude oil futures settle at $74.07

• Up $0.82 or 1.12%

Crude oil futures are snapping a five-day decline that saw its price move down from $80.62 to a low yesterday of $72.48. The low price today reached $72.82. The high reached $74.22. At current levels, the process is still down over 8% over the last six trading days.

For the trading year, the is up $2.43 from the closing level at the end of 2023 or 3.42%. The high price for the year reached $87.67. The low price reached $69.28.

Weekly crude oil build of 1.233M vs draw expected of -2.311M

• The weekly oil inventory data from the EIA (that adjustment)

• Crude oil inventories have a build of 1.233M vs a drawdown of -2.311M estimate
• gasoline build of 2.102M vs 1.964M est.
• Distillates build 3.197M vs 2.532M estimate
• Cushing build of 0.854M vs -1.766M last week.
• Crude production 13.1M unchanged from previous week.

US Energy Secretary says sees no huge increase in oil and gas prices in ‘next short while’

• US Energy Secretary Granholm says global oil market well stocked

US Energy Secretary Granholm spoke with Reuters, main points:

• US could boost the rate of replenishing strategic petroleum reserves maintenance work at two sites winds down
• Work at SPR will be finished by the end of year
• Creating a strategic resilience reserve for stockpiles of critical minerals with allies to help energy transition a good idea
• US talking with allies on critical minerals production, stockpile goals, could release details ‘soon’
• Global oil market well stocked, feels comfortable that there will be no huge increase in oil and gas prices in ‘next short while’
• Even OPEC countries recognize there is only so much they can do to manipulate oil prices
• ‘We should all be concerned’ about oil industry consolidation
• US aims to complete export review in q1 2025
• Doesn’t expect permitting pause to damage US competiveness in global LNG market

EU News

European stocks rebound. Close higher on the day

• Major indices all close higher.

The major European indices are rebounding higher today with all the indices closing in positive territory:

• German DAX, +0.89%
• France CAC, +0.87%
• UK FTSE 100, +0.29%
• Spain’s Ibex +0.59%
• Italy’s FTSE MIB, +0.68%

In Europe, benchmark 10 year yields are lower:

• Germany 2.5% -4.2 basis points
• France 2.989%, -4.1 basis points
• UK 4.179%, unchanged
• Spain 3.23%, -5.3 basis points
• Italy 3.813%, -3.1 basis points

Eurozone May final services PMI 53.2 vs 53.3 prelim

• Latest data released by HCOB – 5 June 2024

• Prior 53.3
• Composite PMI 52.2 vs 52.3 prelim
• Prior 51.7

The composite reading is a 12-month high, so it reaffirms that business activity in the euro area is holding up well as a whole. Stronger demand conditions were the key driver underpinning that sentiment. Besides that, business confidence also rose to a 27-month high and price pressures are also seen cooling on the month.That being said, inflation rates continue to remain above their pre-pandemic average.HCOB notes that:

“The specter of recession is off the table. This is thanks to the service sector, where the upswing has recently broadened. In Germany, we can now talk of an upward trend, Italy’s business activity remains solid, and Spain has improved from an already strong position. Only France has experienced a setback, slipping into slightly negative territory. Overall, the service sector is likely to ensure that the Eurozone will show positive growth again in the second quarter. This is evident from the Composite PMI and our GDP Nowcast, which takes the PMI into account.

“New business in the service sector is gaining momentum.The corresponding index has been rising since last November, and order intakes have been increasing for three months. This is complemented by steady employment growth and future expectations, which have brightened considerably. “France appears to be an outlier among the four leading Eurozone economies with its weak economic performance. However, new business is growing slightly faster than in the previous month, bringing France more in line with the other economies. We are confident that the Eurozone’s second-largest economy will not curb the region’s overall growth during the coming months.

“The European Central Bank (ECB) is getting a tailwind from the PMI. The PMI price components for the service sector indicate a slight easing of inflationary pressures, making an ECB rate cut on June 6 more likely.Reduced inflation pressures are evident in both costs and selling prices. This development is expected to be explicitly mentioned in the press conference by ECB President Christine Lagarde, countering the unexpectedly sharp wage increases reported for the first quarter. However, the PMI price indices do not yet give the all-clear, as they are unusually high in the context of the rather weak economic situation.”

Eurozone April PPI -1.0% vs -0.4% m/m expected

• Latest data released by Eurostat – 5 June 2024

• Prior -0.4%
• PPI -5.7% vs -5.3% y/y expected
• Prior -7.8%

Producer prices in the euro area declined in April but owes much to a drop in energy prices. If you strip that out, PPI actually increased by 0.2% on the month instead. Here’s the breakdown:

• Intermediate goods +0.3%
• Energy -3.6%
• Capital goods +0.2%
• Durable consumer goods +0.2%
• Non-durable consumer goods +0.1%

Germany May final services PMI 54.2 vs. 53.9 expected

• The final reading from HCOB – 05 June 2024

• Final Services PMI 54.2 vs. 53.9 expected and 53.2 prior.
• Final Composite PMI 52.4 vs. 52.2 expected and 50.6 prior.

Key findings:

• HCOB Germany Services PMI Business Activity Index at 54.2 (April: 53.2).12-month high.
• HCOB Germany Composite PMI Output Index at 52.4 (April: 50.6).12-month high.
• Job creation gathers pace as business optimism grows.

Comment:

Commenting on the PMI data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said:

“Things are looking up. The mood in the German service sector is improving month by month. There’s growing hope that theGerman economy is not the sick man of Europe after all.In fact, Germany is no longer lagging behind other countries andhas passed this baton to France, where the service sector has slipped back into recession. Meanwhile, Germany’s service sector has caught up with Italy’s and almost also to Spain’s, whose business activities have been rising since the beginning of the year and last autumn, respectively. A well-performing tourism sector likely plays a crucial role in this upswing.”

“Employees continue to have good prospects. Employment has been rising steadily for five months, indicating strong confidence among businesses. Skeptics might argue that the increased demand for workers is due to declining productivity. For instance, if ten employees retire or leave a company, they might need to be replaced by twelve people because the new hires are less experienced or unwilling to work overtime. While this may be true in some cases, we believe that the primary factor is that growing business activity and improved new business can only be managed with more staff.”

“Inflationary pressure in the service sector is easing somewhat. Operating costs, significantly influenced by wages, have increased less sharply than in the previous month. This has likely led to less substantial price increases for end consumers. However, compared to historical levels, inflationary pressure remains above average. The positive side of this development is that service sector companies still seem to have some pricing power, which bodes well for the economic stability of the sector.”

France May final services PMI 49.3 vs 49.4 prelim

• Latest data released by HCOB – 5 June 2024

• Prior 51.3
• Composite PMI 48.9 vs 49.1 prelim
• Prior 50.5

Demand conditions improved but the French services sector still slumped in May. That is seeing overall business activity ease back as well. The main culprit for that is a sharp decline in new export business. The good news for the ECB at least is that price pressures are at their lowest in three years. HCOB notes that:

“The latest HCOB PMI figures are giving mixed messages about the state of the French services sector. Although business activity declined slightly in May, overall demand grew for the second month in a row. Additionally, although at a slower pace, employment improved for another month, showing robust expectations about the future.

“New orders: Weak abroad, strong at home. The latest HCOB France Services PMI shows overall demand rising, but foreign demand weakened for the third consecutive month, implying stronger domestic demand for at least two months in a row now. Sales from Asia, the UK and the US were reportedly down.

“Services inflation slowed in May, but stayed fairly elevated. For input prices, the increase can be attributed to higher salaries and greater supplier charges. Wages remain a risk for the ECB due to the possibility of a resurge in consumer price inflation. Service providers managed to pass on higher costs to customers, but only partially, as evidenced by the output prices index signaling only a marginal rate of increase.”

Spain May services PMI 56.9 vs 56.4 expected

• Latest data released by HCOB – 5 June 2024

• Prior 56.2

Once again, Spain continues to be the bright spot in the euro area. This marks the steepest rise in activity for over a year. HCOB notes that:

“In May, Spain’s services sector continued to expand. Activity and new business both saw substantial growth, with the Services PMI Business Activity Index rising to 56.9. This growth was driven by a strong increase in new business, which has now risen for six consecutive months. Panelists reported – as also seen in the manufacturing sector – higher overall demand and greater success in acquiring new customers. Particularly encouraging was the significant rise in export business, especially in key markets like France and Germany.

“Spanish service providers are urgently seeking workers. Service providers continued to expand their workforce to manage growth, although the employment increase was the smallest since February. Despite the workforce expansion, staff numbers were often deficient, leading to a further rise in outstanding business – the steepest since April 2023.

“The services sector continues to face the issue of rising prices.The primary reason is rising wages, which constitute a significant amount of expenses in the labor-intensive services sector. Consequently, service providers are passing these costs on to consumers. The cost pressures indicated by the PMIs are also reflected in official consumer price developments over the past three months, which have now alarmingly risen to 3.6%.If the ECB is about to lower interest rates in the June meeting, as we anticipate, there is additional concern about price developments in the coming months.”

Italy May final services PMI 54.2 vs. 54.4 expected

• The final reading from HCOB – 05 June 2024

• Final Services PMI 54.2 vs. 54.4 expected and 54.3 prior.
• Final Composite PMI 52.3 vs. 52.6 prior.

Key findings:

• Slower growth of both activity and new work.
• Inflationary pressures ease but remain historically elevated.
• Outlook brightens and jobs growth is accelerated.

Comment:

Commenting on the final PMI data, Dr Tariq Kamal Chaudhry, Economist at Hamburg Commercial Bank, said:

“The Italian service sector continues to grow strongly. The HCOB Business Activity PMI Index for May has remained stable at 54.2. The growth seems to have a solid foundation and is likely to continue marching forward, with encouragement taken from the strong upward trend in the New Export Business Index”

“The service sector is showing resilience.The promising outlook, with growing orders both domestically and internationally, is reflected in increased hiring. What’s encouraging about the employment figure is that respondents noted that many new hires were on permanent contracts.”

“A major downside of the survey is the continued sharp rise in input prices. Panelists have reported higher costs for personnel, energy, and utilities. The only silver lining is that they can pass on at least some of the price growth to consumers due to improved demand conditions.”

“Italian service providers are looking optimistically towards the future. Future activity expectations have improved among service companies. However, the sub-index remains below the historical average. According to anecdotal reports, companies have linked their confidence to an increase in new customers, as well as hope for a better economic and geopolitical climate.”

UK May final services PMI 52.9 vs. 52.9 expected

• The final reading from S&P Global – 05 June 2024

• Final Services PMI 52.9 vs. 52.9 expected and 55.0 prior.
• Final Composite PMI 53.0 vs. 52.8 expected and 54.1 prior.

Key findings:

• Business activity growth solid, but down from April’s high.
• Hiring activity rises but labour market tightness a constraint.
• Slowest increase in prices charged for over three years.

Comment:

Joe Hayes, Principal Economist at S&P Global Market Intelligence, which compiles the survey, said:

“The PMI survey for May showed another reasonable rate of expansion in the UK service sector. Taken in tandem with our earlier-released manufacturing survey, the PMIs implyGDP growth of around 0.3% so far in the second quarter.”

“Of particular interest to the immediate outlook for the UK economy will be the prices measures, with the Bank ofEngland potentially moving to cut interest rates as soon asthis month. The PMI surveys show prices for UK services rising at the slowest pace for over three years. That’s now three months on the trot that selling price inflation in the service sector has eased – this will be very encouraging to the Monetary Policy Committee and suggests the trajectory of services prices is moving in the right direction.”

“It is worth noting however that the PMI’s gauge of UK services inflation is still sitting well above its pre-pandemic trend, which may give more weight to those suggesting the Bank of England hold out until August to loosen policy.”

ECB’s Kažimír: Inflation is on a good trajectory

• Remark by ECB policymaker, Peter Kažimír

• Believes that ECB is nearing its first interest rate cut

Asia-Pacific-World News

China Caixin Services PMI for May 2024 54.0 (prior 52.5)

• Composite is 54.1 (prior 52.8)

China Caixin Services PMI for May 2024 54.0 (prior 52.5)

• expanded fastest since August 2023
• Composite 54.1 (prior 52.8)

PBOC sets USD/ CNY mid-point today at 7.1097 (vs. estimate at 7.2418)

• PBOC CNY reference rate setting for the trading session ahead.

PBOC injects 2bn via 7-day RR, sets rate at an unchanged 1.8%

• 250bn mature today
• a net drain of 248bn yuan in Open Market Operations (OMOs)

Australian Q1 2024 GDP +0.1% q/q (expected +0.2%)

• Data for economic growth in Australia during the January, February and March months of 2024

Economic growth in Australia in the first quarter of 2024.

+0.1% q/q

• expected 0.2%, prior 0.2%

+1.1% y/y

• expected 1.2%, prior 1.5%

The ‘Chain price index’ rose 0.8% y/y.

Australian Bureau of Statistics comment:

• GDP growth was weak in March
• economy experiencing its lowest through the year growth since December 2020
• GDP per capita fell for the fifth consecutive quarter, down 0.4%

Australian May Services PMI (final) 52.5 (prior 53.1)

• Judo Bank S&P Global PMI

Reserve Bank of Australia Governor Bullock says she expects Q1 GDP growth to be low

• expect Q1 GDP growth to be quite low
• economy is weak, that is showing up in consumption
• looking for a soft landing for the economy
• underlying inflation is coming down, but only slowly
• demand still exceeds the economy’s capacity to supply
• Not ruling anything in or out on policy
• Labour market easing on a number of measures
• Board considers monetary policy is restrictive
• If inflation proves sticky, won’t hesitate to hike
• If economy is much weaker, will be ready to ease

Australian Treasurer Chalmers says Q2 GDP will also be ‘difficult’

• Q1 GDP showed the economy slowing to barely a crawl at +0.1% q/q

• Expect second-quarter GDP to be `similarly difficult’
• Savings ratio drop shows Australians under pressure

New Zealand data: Q1 Terms of trade +5.1% q/q (expected +3.1%)

New Zealand Q1 Terms of trade +5.1% q/q

• expected +3.1%, prior -7.8%

Export Prices -0.3% q/q

• expected +1.5%, prior -4.2%

Import Prices -5.1%

• expected -1.0%, prior +3.8%

Japan data: April total cash earnings +2.1% y/y (real wages -0.7%)

• Wages data from Japan for April 2024

Wages data from Japan for April 2024:

Labour Cash Earnings +2.1% y/y

• expected +1.8%, prior +1.0%

Real Cash Earnings (i.e. after inflation) -0.7% y/y

• expected -0.9%, prior -2.1%

Japan Services PMI for May 2024: 53.8 (prior 50.6)

• Higher into expansion for the Jibun / S&P Global PMI

Jibun Bank Services PMI May Final: 53.8

prior 53.6

Composite 52.6

• prior 52.4

Cryptocurrency News

Bitcoin Eyes Breakout as It Tests Key Resistance at May High

• The high price from May reached $71958

Bitcoin has experienced a notable surge, rising for the fourth consecutive day and currently testing a significant topside trend line. Today, the price has reached a high of $71,759, approaching the crucial resistance level set by May’s high of $71,958. A successful move above this trend line and the May high could significantly boost the bullish sentiment among traders, potentially leading to targets at the all-time high closing level of $73,121 and the intraday all-time high of $73,794.

The sustained buying interest has propelled Bitcoin’s momentum, sparking optimism in the market. The critical question now is whether this momentum can persist, driving Bitcoin past these pivotal resistance levels and into uncharted territory. If buyers continue their aggressive play, a breakout could solidify the bullish trend, encouraging further upward movement and renewed enthusiasm among investors.

“Widening ownership is going to be propelling Bitcoin to $150,000”

• “Institutional adoption and infrastructure being built around Bitcoin is only beginning.”

• There’s the tailwinds that are associated with halving that just take place.
• We also know, because of the Bitcoin ETF (exchange-traded fund), there have been tremendous inflows, but institutional adoption and infrastructure being built around Bitcoin is only beginning and that makes crypto and especially Bitcoin a bona fide asset class.
• And I think that sort of widening ownership is going to be propelling Bitcoin to $150,000.
• And again, surprise – maybe surprising or not surprising, Bitcoin still follows math. More than 87% of the movement in Bitcoin still follows just the number of wallets and the activity per wallet and both are moving higher.

Digital euro is likely but not inevitable, says ECB digital currency chief

• A comment by ECB digital euro director, Evelien Witlox

“I think there is certainly a high likelihood. But it is not inevitable at the moment.”

JPMorgan’s Kolanovic says the resurgence in meme-stocks is a bad sign for stock market

• JPMorgan chief global markets strategist Marko Kolanovic.

JPMorgan chief global markets strategist Marko Kolanovic, his note from Monday, in brief:

• resurgence in meme stocks is a bad sign for the stock market
• reiterated his bearish view
• “It is possible, but historically and statistically unlikely, that this time is different and that high valuations of risk assets are justified”
• cites S&P 500 forward price-to-earnings ratio at 21x compared to its 30-year average of 17x
• “What is perhaps different this time is that investors have little concern about asset valuations despite the high level of interest rates, and that is evidenced from the recent increase in meme stock and crypto trading activity, valuations of tech stocks, and diverging performance of stocks vs. bonds”
• recent economic data suggests an economic slowdown or even a recession …”These signals include last week’s Chicago PMI, past year increase of unemployment, sharp drop in home sales, almost 2 years of yield curve inversion, uptick in consumer delinquencies, and several others”

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