Stock Markets Recap: NVIDIA Passes Microsoft as Focus Turns to Asia

US Equity Markets: Nasdaq’s Winning Streak Continues

On Tuesday (June 18), the US equity markets trended higher on softer-than-expected US retail sales figures. The Nasdaq Composite Index rose by 0.03%, with the Dow and S&P 500 advancing by 0.15% and 0.25%, respectively.

10-year US Treasury yields slid to 4.223%, supporting demand for riskier assets.

Furthermore, US Futures signaled a positive start to the Wednesday, June 19, Asian session. The Nasdaq Mini and S&P 500 mini were up by 20 and 3 points, respectively, while the Dow mini rose by 2 points.

AI Tech stocks led the way. Significantly, the Nasdaq extended its winning streak to seven sessions. Investor expectations of a September Fed rate cut drove buyer demand for rate-sensitive tech stocks.

US Retail Sales and Fed Speeches

US retail sales increased by 0.1% in May after declining by 0.2% in April. Economists forecast retail sales to increase by 0.2%. Softer trends in consumer spending could dampen demand-driven inflation and allow the Fed to cut interest rates.

FOMC members Thomas Barkin, Susan Collins, Adriana Kugler, and Alberto Musalem also influenced sentiment toward the Fed rate path.

FOMC Member Susan Collins warned against overreacting to softer inflation numbers, calling for patience on rate cuts.  Furthermore, FOMC Members Thomas Barkin, Alberto Musaleme, and Adriana Kugler continued to see progress in bringing inflation to target but were not yet ready to cut interest rates.

According to the CME FedWatch Tool, the probability of the Fed standing pat in September fell from 38.5% to 32.3% on Tuesday. The cautious tones from Fed speakers tempered the influence of the retail sales numbers on investor expectations of a September Fed rate cut.

The Winners and Losers

On Tuesday, NVIDIA (NVDA) rallied 3.51% on sentiment toward AI and chipmakers, passing Microsoft (MSFT) to become the largest listed company. In contrast, Microsoft fell by 0.45%.

Micron Tech. Inc. (MU) and Qualcomm (QCOM) saw gains of 3.81% and 2.17%, respectively. Arm Holdings (ARM) surged 8.62%.

However, Apple Inc. (AAPL) declined by 1.00%, with Alphabet Inc. (GOOGL) falling by 1.21%. Meta Platforms (META) and Amazon.com (AMZN) saw losses of 1.41% and 0.68%, respectively. Tesla Inc. (TSLA) also ended the session in the red, decreasing by 1.33%.

Global Market Influences: Fed Rate Cut Bets and China

Rising investor bets on a September Fed rate cut will likely continue to drive buyer demand for the Asian equity markets.

Can rising investor bets on a Fed rate cut offset the uncertainties surrounding China’s economic recovery?

Industrial production and fixed asset investment figures from China affected investor hopes of a sustainable economic recovery in China. Notably, the numbers contrasted with the Caixin Manufacturing PMI survey.

The Caixin Manufacturing PMI increased from 51.4 to 51.7 in May, with manufacturers signaling strong domestic and overseas demand.

Uncertainties about the Chinese economy could impact the Hang Seng Index, the Mainland China equity markets, and the ASX 200. Hopes of further stimulus measures have cushioned the downside to date.

Moreover, trade tensions between the EU and China could intensify if Beijing retaliates against EU tariffs on electric vehicle imports. Rising tensions between the EU and China will likely affect market risk sentiment.

Asian Economic Calendar: Trade Data and the BoJ in Focus

On Wednesday, June 19, all eyes will be on the Japanese economy. The Reuters Tankan Survey and trade data could influence investor expectations of a Bank of Japan (BoJ) rate hike.

Economists forecast the Reuters Tankan Survey to rise from 9 to 12 in June.

Furthermore, economists expect the trade deficit to surge from ¥462.5 billion to ¥1,300 billion in May. However, upward trends in imports and exports could limit the effects of a widening trade deficit on the Nikkei.

Improving trade terms and sentiment across the private sector could signal a rosier macroeconomic environment. Nikkei Index-listed trade-related stocks would likely benefit from upbeat numbers.

However, hawkish Bank of Japan commentary could catch the markets by surprise. Rising bets on a Bank of Japan rate hike would drive buyer demand for the Yen. This week, Bank of Japan Governor Kazuo Ueda warned the BoJ was data dependent vis-à-vis hiking interest rates in July.

A more hawkish BoJ rate path would support buyer demand for the Yen. The Nikkei Index is sensitive to movements in the Japanese Yen. Notably, the Nikkei hit decade highs in April on Yen weakness.

Commodities and Forex Trends: Crude Oil, Gold, and Iron Ore

On Tuesday, June 18, gold spot (XAU/USD) rose by 0.44% to $2,329, with iron ore spot gaining 0.22%. Furthermore, WTI crude oil advanced by 1.54% to $81.57. Risk-on sentiment drove buyer demand for commodities.

Will the current trends in commodity prices sustain the momentum for the mining and oil sectors, or will external shocks derail this progress?

Commodity price trends will support gains across the gold, mining, and oil sectors. However, the more hawkish-than-expected RBA press conference could affect the ASX 200.

On Tuesday, the USD/JPY rose by 0.08%, closing the session at 157.837. The weaker Yen may drive buyer appetite for Nikkei-listed export stocks.

For upcoming economic events, refer to our economic calendar.