Major U.S. indexes are indicating a promising Monday opening, following a positive performance the week before. This upward trajectory can be partly attributed to renewed optimism about future interest rates, sparked by Federal Reserve Chair Jerome Powell's comments and weaker-than-expected job growth in April.
This has led to increasing confidence among investors of a rate cut in imminent months, with predictions of a 91.2 percent chance of rate reduction by September, based on the FedWatch Tool from CME Group. However, the absence of crucial U.S. economic data might result in muted trading activity, with traders potentially remaining cautious.
The economic updates this week do not offer much in terms of major announcements, though a preliminary report on consumer sentiment in May and comments from several Fed officials might find some takers.
Last week saw a strong performance from major stock averages. Particularly, tech-led Nasdaq led the growth. Throughout the week, the Dow improved by 1.1 percent, the S&P 500 grew by 0.6 percent, while Nasdaq gained 1.4 percent.
This successful trend followed the Labor Department's report that U.S. employment in April rose significantly less than expected. Specifically, April saw a 175,000 job increase, lower than the expected 243,000.
Moreover, there was a slight rise in the unemployment rate from 3.8 percent in March to 3.9 percent in April and a dip in wage growth from 4.1 percent in March to 4 percent in April. This data added to the positivity regarding future interest rates.
Further optimism was sparked by Apple's positive earnings report, leading to a 6 percent rise in the tech giant's stocks. Apple’s fortunes were boosted by better than expected second-quarter results and a $110 billion stock buyback.
On the flip side, a concerning report released by the Institute for Supply Management showed an unexpected contraction in U.S. service sector activity in April. This marks the first such contraction since December 2022.
Highlight performers on the day were semiconductor stocks, which saw some of the best market performances, contributing to the Nasdaq surge. Additionally, housing, steel, brokerage, and retail stocks exhibited strong performance.
Lastly, in Commodity and Currency Markets, Crude oil futures are seeing an upward trend, while gold futures, after a slight decrease in the previous session, are rising.In the currency exchange, the U.S. dollar is currently valued at 153.53 yen, slightly increased from its previous rate of 153.05 yen. Its value against the euro stands at $1.0784, compared to the previous rate of $1.0761.
In Asia, stock markets are performing well despite thin trading on Monday. Japanese and South Korean markets are closed due to public holidays. The U.S. dollar has seen a drop due to weakened U.S. job growth, encouraging speculation about forthcoming Federal reserve rate cuts. Oil prices increased approximately 1%, primarily driven by Saudi Arabia increasing the cost of their crude oil. Additionally, the Israeli army has advised Palestinians to leave eastern Rafah, indicating a land invasion could be imminent, potentially contributing to gold trading higher.
Chinese markets gained significantly as the country's service sector's expansion was prudently moderate but stable. Subsequent positivity was due to Chinese politburo promising further support for the economy with careful financial and proactive fiscal policies. The Shanghai Composite Index increased by 1.2% to 3,114.72 after the May Day holidays.
Australian markets performed well, led by rate-sensitive financial and property development industries. Technology and mining stocks also experienced gains. Australia's S&P ASX 200 Index increased by 0.7% to 7,682.40, prior to Tuesday's Reserve Bank of Australia's policy meeting. In contrast, New Zealand's S&P/NZX 50 index dropped 1% to 11,820.78.
In Europe, markets responded positively to the lower-than-expected U.S. jobs report that released on Friday, demonstrating an increased need for third-quarter rate cuts. According to media reports, European Central Bank's Chief Economist, Philip Lane, expressed that inflation is aligning with targets and a June rate cut is imminent.
In other economic updates, the Eurozone's services index for April was confirmed at 53.3, noticeably up from March's 51.5. Investor Confidence in the Eurozone rose from -5.9 to -3.6 in May, surpassing expected scores and marking a seventh consecutive increase.
Notably, Swedish mining firm Boliden AB saw a surge in stock after reaching an agreement to reopen the mine at Tara on a financially sustainable basis. In contrast, Dutch postal firm PostNL NV reported loss higher than expected for the first quarter, causing downward pressure on its stock.
Lastly, in the U.S., the president of the Richmond Federal Reserve, Thomas Barkin, is set to speak at the Columbia Rotary Club at 12:50 pm ET. The New York Federal Reserve President, John Williams, will also participate in a conversation at the Milken Institute 2024 Global Conference at 1 pm ET.
From the corporate globe, Paramount Global is showing a pre-market upward trend after deciding to commence negotiations with a bidding group from Sony Pictures Entertainment and Apollo, the private equity giant. Tyson Foods have also reported a fiscal second quarter higher than analyst estimations. Meanwhile, Spirit Airlines and Victoria's Secret are likely to experience a fallback in the market after reporting losses and stock downgrades, respectively.
