In this daily market update, we delve into the significant developments that occurred on Friday, June 16, 2023. The S&P 500 and Nasdaq experienced a remarkable surge, reaching their highest levels in 14 months. Market participants welcomed encouraging economic data that bolstered expectations of the U.S. Federal Reserve concluding its aggressive interest-rate hike campaign. While the Fed chose to maintain rates at the 5%-5.25% range on Wednesday, they hinted at potential hikes of at least half a percentage point later this year due to lingering inflation concerns.
Easing Inflation and Treasury Yields
A series of economic indicators indicating easing inflation helped alleviate concerns about future rate hikes, contributing to a decline in Treasury yields. Unexpectedly, U.S. retail sales rose in May as consumers increased spending on various goods, including vehicles. Jobless claims remained steady at 262,000, slightly above economists’ projections of 249,000 claims for the week ending June 10. Furthermore, import prices experienced a decline in May, with the sharpest annual decrease in three years. These positive trends countered worries regarding inflationary pressures.
The S&P 500 witnessed an impressive climb of 1.22%, closing the session at 4,425.84 points. Similarly, the Nasdaq surged by 1.15%, reaching 13,782.82 points and accumulating a nearly 4% gain throughout the week. The Dow Jones Industrial Average also experienced significant growth, rising by 1.26% to close at 34,408.06 points.
EUR/USD Hits 5-Week High on ECB’s Rate Hike
In foreign exchange markets, the EUR/USD pair reached a 5-week high on Thursday following the European Central Bank’s eighth consecutive interest rate hike. The ECB raised rates by the expected 25 basis points to 3.5%, the highest level in 22 years. The bank also expressed intentions for further tightening in order to attain the Eurozone’s medium-term inflation target of 2%. Consequently, the EUR/USD pair soared to a 5-week high of 1.0952 during the Asian trading session.
Dollar Weakens and Commodities React
The Dollar Index plunged to 101.70 in early Asian trading, reaching its lowest point since May 12. The weakening dollar influenced the recovery of gold prices, which rebounded from initial losses during New York trading to close with a slight gain. COMEX gold for August delivery settled at $1,970.70 per ounce, up $1.80, after dipping as low as $1,936.10. Meanwhile, crude oil prices surged by approximately 3% to a one-week high due to the Dollar’s decline and increased refinery activity in China, the leading crude importer. Brent futures settled at $75.67 per barrel, rising by $2.47 (3.4%), while West Texas Intermediate (WTI) crude settled at $70.62 per barrel, climbing by $2.35 (3.4%). These closing prices represented the highest levels for both Brent and WTI since June 8.
Energy Market Gains Momentum
The energy market found support in the unexpectedly strong U.S. retail sales figures for May and higher-than-anticipated jobless claims. These factors contributed to a weakened dollar, making crude oil more affordable for holders of other currencies and potentially boosting oil demand. Moreover, data revealed that China’s oil refinery throughput experienced a 15.4% year-on-year increase in May, reaching its second-highest total on record. Analysts predict that voluntary crude output cuts implemented by OPEC+ in May, along with Saudi Arabia’s planned cuts in July, will help sustain prices amidst robust demand. UBS forecasts a supply deficit of approximately 1.5 million barrels per day (bpd) in June and over 2 million bpd in July.
Cryptocurrencies Experience Decline
Across the cryptocurrency market, most major digital assets faced a decline on Thursday. Bitcoin (BTC) traded at $25,399, marking a 1.9% decrease over the past 24 hours and hitting a daily low of $24,797, the lowest since March 17. Similarly, Ethereum (ETH) traded 3.8% lower at $1,663. The slump began on Wednesday after the Federal Reserve announced its decision to maintain the key borrowing rate, but with indications of two additional rate increases anticipated later in the year.