In this daily market update, we’ll delve into the recent developments that have sparked volatility across various sectors. As the US House prepares for a crucial debt-ceiling vote, market participants are closely monitoring the implications for equity indices, treasury yields, job openings, the US dollar, precious metals, and cryptocurrencies. Additionally, weak demand from China and internal dissention within OPEC+ have influenced the oil market. Let’s explore the details of these events and their impact on the financial landscape.
US Benchmark Equity Indices Dip Ahead of Debt-Ceiling Vote:
On Wednesday, US benchmark equity indices experienced a decline as investors braced themselves for the upcoming House vote on a debt-ceiling bill. The vote, scheduled for later in the day, triggered concerns as media reports indicated that several Republicans and Democrats planned to vote against the bill. The vote is expected to take place around 8:30 pm (Singapore time). The S&P 500 and the Nasdaq Composite both fell by 0.6%, settling at 4,179.8 and 12,935.3, respectively. The Dow Jones Industrial Average lost 0.4% and closed at 32,908.3.
Treasury Department’s Warning Fuels Yield Drop:
Adding to the market unease, the Treasury Department recently announced that the US might face insufficient funds to meet its debt obligations after June 5. As a result, the US two-year yield decreased by 6.6 basis points to 4.41%, while the 10-year rate dropped 5.1 basis points to 3.65% on Wednesday. These developments have heightened concerns about the overall stability of the US economy.
Surprising Rise in US Job Openings Amidst Layoffs:
Contrary to expectations, US job openings surged unexpectedly in April, reaching the highest level in three months. The Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey reported nearly 10.1 million vacancies by the end of April, surpassing the revised figure of 9.75 million in March. This increase defied the consensus estimate of 9.35 million openings and indicated a positive trend in the labor market, as layoffs also declined during this period.
US Dollar Retreats from Two-Month High:
The US dollar faced a retreat from its more than two-month high on Wednesday, influenced by remarks from a Federal Reserve official. Fed Governor and vice chair nominee Philip Jefferson stated that a decision to hold the benchmark overnight interest rate firm at an upcoming meeting would not signify the end of tightening monetary policy. The dollar index, which had climbed to 104.63 earlier in the day, declined as market participants recalibrated their rate hike expectations. The USD/JPY pair fell by 0.34% to 139.33.
Euro Slides on European Inflation Data:
The euro experienced a decline against the US dollar, dropping to 1.066, its lowest level since March 20. This downward trend was triggered by data revealing that European inflation was cooling at a faster pace than anticipated. The GBP/USD pair, on the other hand, remained relatively stable, trading at 1.2422, reflecting a modest 0.08% increase for the day.
Gold’s Volatile Path Amidst Economic Indicators:
Spot gold prices demonstrated a mixed performance on Wednesday. Initially, gold rose by 0.4% to $1,966.89/oz, driven by weaker-than-expected Chicago Purchasing Managers’ Index (PMI) data. However, gold pared some of its gains following stronger-than-anticipated US jobs data. The precious metal has experienced a decline of approximately 1.1% this month and over $100 from its near-record highs reached in May. COMEX gold futures settled 0.3% higher at $1,982.10/oz, while silver witnessed a 1.8% increase, closing at $23.65/oz.
Oil Prices Plummet on Weak Demand and OPEC+ Concerns:
West Texas Intermediate (WTI) crude oil prices dropped to their lowest level in over two months due to a combination of weak demand from China and a stronger US dollar. WTI crude for July delivery settled at $67.32 per barrel, down $1.37, marking its lowest price since March 20. The global benchmark, July Brent crude, also experienced a decline, falling by $0.92 to $72.62 per barrel. The decrease in oil prices coincided with China reporting a slowdown in manufacturing activity, as reflected by a decrease in the purchasing managers’ index to 48.8 in May.
Cryptocurrencies Await Debt-Ceiling Vote Outcome:
Most cryptocurrencies faced a decline on Wednesday as market participants eagerly anticipated the US House vote on the debt-ceiling agreement. Bitcoin (BTC) recorded a 2.8% drop over the past 24 hours, reaching $27,034 and hitting a day low of $26,866. Ethereum (ETH) fell by 2.3% and settled at $1,865. BTC is on track to end May with a 4% decline, while ETH is expected to register a 2% monthly gain. Year-to-date, BTC has seen a remarkable 63% increase, while ETH has achieved a solid 55% gain.