Global Markets Report - 4 July

Australia

Australia's S&P/ASX 200 looks set for a flat open ahead of the central bank's latest interest-rate decision.

ASX futures were barely moved ahead of the open, mirroring economists' uncertainty over whether the Reserve Bank would raise or hold the cash rate.

The ASX 200 gained 0.6% Monday, although strong gains by gold miners and losses among tech stocks suggests some positioning for potential volatility. US stocks provided a modestly positive lead as investors geared up for the second half of 2023 following a market rally to start the year.

The S&P 500 added 0.1%. The Dow Jones Industrial Average gained less than 0.1%. The Nasdaq Composite rose 0.2%. 

Turning to commodities, gold is holding flat at US$1,921.69 per troy ounce. The Brent Crude is down 1.01% to US$74.65 a barrel.

Meanwhile, the Australian dollar climbed/fell 0.7262% to now be worth 66.58 US cents.

Australian government bonds also rose, with the 2 Year yield now at 4.07% and the 10 Year yield climbing to 4.00%. The benchmark 10-year U.S. Treasury yield rose to 3.856%, from 3.818% 

The Australian dollar is steady at 66.72 US, and The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged up to 102.97.

Asia

In Asia, Chinese shares ended higher, with market sentiment buoyed by the reconnection between Washington and Beijing. Treasury Secretary Janet Yellen is due to travel to China on Thursday to meet with senior government officials.

The benchmark Shanghai Composite Index added 1.3%, the Shenzhen Composite Index rose 0.5%, and the tech-heavy ChiNext Price Index closed 0.6% higher.

Hong Kong stocks ended the session higher, picking up from a muted trading pattern last week. The benchmark Hang Seng Index added 2.1%, rising in line with other regional markets amid a positive mood supported by signs of moderating U.S. inflation.

The Nikkei Stock Average rose 1.7% to its highest level since March 1990, after data showed that business sentiment among Japanese large manufacturers improved and as U.S. consumer inflation eased.

Europe

European stocks dropped overnight, though oil and mining stocks rose alongside crude and metal prices.

The Stoxx Europe 600 and CAC 40 fell 0.2%, the FTSE 100 edged 0.1% lower and the DAX backtracked 0.4%.

Oil majors gained as Brent crude roses 0.4% to $75.70 a barrel.

"Today's update from major oil-producing nations saw Saudi Arabia and others commit to holding production down, while Russia will make further cuts," IG's Chris Beauchamp writes.

Ocado tops the Footsie, up 6% after retail trade publications said it had appointed Amazon director Gregor Ulitzka as European president of its technology business. It follows a report last month claiming that Amazon could be among US "technology heavyweights" eyeing it up. 

North America

US stocks edged higher in a shortened trading session Monday, as investors geared up for the second half of 2023 following a market rally to start the year.

The stock market is coming off an expectation-defying first-half performance, with all three major U.S. indexes logging gains despite concerns about the economy.

The Nasdaq recorded its best start to the year since the 1980s, as an artificial-intelligence craze swept through markets and boosted megacap tech shares.

The S&P 500 finished the first half up 16%.

"There are not a lot of participants today and volume is low, but I think people are celebrating the fact that we just rocked June," said Jeff Kilburg, founder and chief executive of KKM Financial. "Investors really started the fireworks show early last Friday."

After a strong first half, the S&P 500 is historically more likely to rise in the second half and tends to notch bigger advances, according to a CFRA analysis. The S&P 500 has gained an average of 4.2% during all second halves since 1945, rising 69% of the time.

When the S&P 500 is coming off a first-half gain of 10% or more, the broad index on average adds 8% in the second half and moves higher 82% of the time, according to CFRA. U.S. markets closed early Monday for the Independence Day holiday and will remain closed Tuesday.

Electric-vehicle stocks jumped Monday after Tesla posted record quarterly sales. Shares of Tesla rose 6.9%, their best one-day gain since March. Rivian Automotive climbed 17% after it reported EV deliveries that topped expectations, its largest percentage increase since November 2022. Lucid Group gained 7.3%. In economic data, the Institute for Supply Management's manufacturing index slipped to 46 in June, contracting for an eighth consecutive month.

"It is a give and take between how much the economy is softening and how much that might preclude the Fed from further hiking interest rates," said Russell Price, chief economist at Ameriprise Financial. On Wednesday, minutes from the Federal Reserve's June meeting will be released, offering insights into central-bank officials' approach to interest rates.

That will be followed Friday with the June jobs report, which economists expect to show continued resilience in the labor market.