Global stocks were poised to finish the first half of 2024 strongly, with investors eyeing crucial U.S. inflation data for indications on the timing of Federal Reserve interest rate cuts. The yen’s decline to a 38-year low raised expectations of potential intervention by Japanese authorities to stabilize the currency. Meanwhile, oil prices were set for a third consecutive weekly increase.
On the last trading day of the first half, stocks hovered near record highs. The AI boom on Wall Street propelled the S&P 500 index nearly 15% higher over the past six months, with significant gains in Europe and Asia as markets brushed aside electoral uncertainty. There was little reaction from the dollar and U.S. stock index futures to the U.S. presidential debate, which saw President Joe Biden stumble in his head-to-head with former President Donald Trump ahead of the November election.
Analysts at ING bank noted that a potential Trump administration could be more favorable for the dollar through looser fiscal policy and a more aggressive trade environment. However, concerns about the French parliamentary elections, which begin on Sunday, pushed the risk premium on French government bonds over German bonds to its widest since the eurozone debt crisis in 2012, putting the euro on track for its biggest monthly fall since January.
The MSCI All Country Stock Index remained firm at 804.27 points, near its lifetime high of 807.17 on June 20, and up about 10.5% for the year. In Europe, the STOXX index of 600 companies gained 0.11% to 513 points, cementing its 7% gain for the year.
Eren Osman, wealth management director at Arbuthnot Latham, highlighted the strong performance of the equity market in the first half and pointed to the tech majors and AI boom as key drivers for the second half. He emphasized that investment in the tech sector is unlikely to slow down soon, suggesting that betting against this trend could be unwise.
The Federal Reserve’s preferred inflation measure, the personal consumption expenditures (PCE) index, was due before the opening bell on Wall Street. If annual growth slowed to 2.6% in May, as expected, it could pave the way for rate cuts later this year. Traders are pricing in a 64% chance of a first Fed cut in September, up from 50% a month ago, though unexpected core PCE figures could alter these expectations.
S&P 500 futures and Nasdaq futures both ticked higher. MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.2%, on track to gain more than 3% for the month, its best performance since February. Chinese markets reversed early losses to trade higher, with China’s benchmark CSI300 up 0.2% and Hong Kong’s Hang Seng Index rising 0.56%.
In currency markets, the dollar eyed a monthly gain of nearly 1.4% against a basket of currencies. The yen fell to a 38-year low of 161.27 per dollar, last trading at 160.91. The Japanese currency has dropped 2.3% this month and over 12% for the year against a resilient dollar, driven by stark interest rate differentials between the U.S. and Japan. Investors are closely watching for potential intervention from Tokyo.
In commodities, gold was slightly firmer at $2,328 an ounce. Brent crude oil futures rose 0.4% to $86.75 a barrel, while U.S. West Texas Intermediate crude futures gained 0.6% to $82.23 per barrel.
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