Making sense of the forces driving global markets |
By Jamie McGeever, Markets Columnist |
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- World stocks and the Nasdaq 100 hit new peaks for a second day in a row. The S&P 500 slips, but is still very close to its record high.
- Some big moves in U.S. tech, with Super Micro Computer +8.8%, Nvidia +4.3% to a record high, AMD +3.6%, and Tesla -3.8%. Real estate is the biggest declining sector, -2.5%.
- Oil stops the rot, kind of, gaining nearly 1% on U.S. crude inventory drawdown and signs of strong U.S. gasoline demand.
- The dollar slips to fresh multi-year lows against the euro and sterling.
- Platinum up another 2.5% to new 11-year high above $1,350/oz. Now up 28% in June, on for its best month since 1986.
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Whirlwind fades, calm returns |
The MSCI All Country index and Nasdaq 100 touched new record highs for a second session, and Asian and emerging market stocks posted solid gains earlier in the day. But the Dow, U.S. small caps and benchmark European indexes all fell. The euro's march higher is taking its toll, and European stocks have under-performed since the brief Israel-Iran war broke out on June 13. The euro on Wednesday rose for a fifth straight day to $1.1665, its highest since October 2021. Sterling hit its highest since February, 2022 at $1.3670, and Britain's FTSE 100 slipped to its lowest this month. Bank of England policymakers may be secretly cheering the pound's rally, however, if it helps tame inflation pressures. The latest Citi/YouGov survey of UK consumers' inflation expectations on Wednesday showed that long-term inflation expectations among the British public rose to the highest since September 2022. |
One sector faring better in Europe on Wednesday, though, was defense, after NATO leaders agreed big increases in defense spending, especially from Europe. U.S. defense stocks have moved in the other direction this week following the Iran-Israel ceasefire. On the policy and macro front, Fed Chair Jerome Powell's second day of congressional testimony passed off without fireworks, although there were sparks in his exchanges with some lawmakers. He reiterated his view that the central bank is right to wait and see what the impact is from tariffs before considering further rate cuts. |
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US foreign investment slump - anomaly or warning? |
Much of the 'de-dollarization' debate has focused on foreign exposure to U.S. securities like stocks and bonds. But investors shouldn't ignore foreign direct investment flows, the traditionally sticky capital that may also be sending out warning signals. Foreign direct investment (FDI) typically involves an overseas entity acquiring the assets of a company in another country or increasing its holdings, often via the purchase of machinery, plants or a controlling stake. FDI is therefore considered a longer-term investment compared to portfolio flows, which can be more volatile. U.S. President Donald Trump says he has attracted record foreign investment into the country. Indeed, the White House has a page on its website with a "non-comprehensive running list of new U.S.-based investments" since Trump's second term began. The running total is in the trillions of dollars and includes pledges from several foreign countries. Included are more than $4 trillion in U.S.-bound investments pledged by the United Arab Emirates, Qatar, Japan and Saudi Arabia. During Trump's trip to the Middle East last month, he said the U.S. is on track to receive $12-$13 trillion of investments from countries around the globe, which includes "projects mostly announced ... and some to be announced very shortly." These flows may emerge in full, in time. But official figures on Tuesday showed that FDI in the first quarter actually fell to $52.8 billion, the lowest total since the fourth quarter of 2022. That's well below the quarterly averages of the past 10 and 20 years. The Commerce Department figures also showed that the U.S. current account deficit widened to a record $450.2 billion in the quarter, or 6% of U.S. GDP, meaning FDI inflows barely covered 10% of that shortfall. |
Should the Trump administration be worried? |
What could move markets tomorrow? |
- Germany GfK consumer confidence (July)
- European Central Bank President Christine Lagarde, Vice President Luis de Guindos and board member Isabel Schnabel speak (at different events)
- Bank of England Governor Andrew Bailey and Deputy Governor Sarah Breeden speak (at different events)
- U.S. weekly jobless claims
- U.S. durable goods (May)
- U.S. trade (May)
- U.S. GDP (Q1, final estimate)
- U.S. 7-year note auction
- Richmond Fed President Thomas Barkin, Cleveland Fed President Beth Hammack and Fed Governor Michael Barr speak (at different events)
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Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. |
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