Monday's Market Update (June 3, 2024)

04 Jun 2024 by rate3

On Monday, stocks declined marginally after a lower-than-expected PMI indicated a manufacturing slowdown. Investors shifted their focus from expecting interest rate cuts to fearing a weakening economy, with banks and industrial stocks leading the decline. The tech sector was mixed, with Nvidia gaining and Microsoft and Alphabet falling. Internationally, Indian bonds fell as Modi's party was expected to win a large parliamentary majority, the Mexican peso weakened sharply after the pro-government party won, and South Africa's stocks rose as investors reacted to the possibility of a pro-Marxist party taking control being lessened. WTI oil fell after OPEC+ decided to increase production. Meanwhile, BTC and ETH remained steady at their two-week levels (~70K and ~3.7K) as the majority of the crypto market fluctuated within relatively narrow ranges.

Details

The manufacturing sector showed continued improvement in May, with a PMI rising to 51.3. New orders grew, boosting production, though domestic demand lagged exports. Businesses grew more optimistic, hiring more staff and building inventories. Input costs rose at the fastest pace in a year, leading to higher prices. 1Y trend: "Up" (SP)

Crypto

Mexico's new president, Claudia Sheinbaum is from the same party as outgoing President Andres Manuel Lopez Obrador, who is not eligible for re-election. As a result, Mexico's crypto policy is likely to remain unchanged (basically, no policy), as Sheinbaum has aligned herself with Obrador's policies. (source)

World Markets

Eurozone manufacturing decline slowed in May. The PMI reached its highest level in over a year, indicating a slower decline in production. New orders, exports and purchasing activity also showed improvement. Business sentiment is at its highest level since early 2022. 1Y trend: "Up" (PMI)
Indian government bond yields hit a one-year low below 7% in June. Investors are optimistic about India's strong economy and stable government after exit polls predicted a win for the incumbent party. This stability is expected to continue economic reforms and attract foreign investment. 1Y trend: "Down"
Brazil's manufacturing growth slowed in May (PMI 52.1) due to floods. Though new orders rose and hiring remained strong, production stalled and business confidence dipped. Despite flood challenges, expectations of future recovery kept the outlook positive. 1Y trend: "Up" (PMI)
South Africa's stock market rebounded 1.4% after four days of decline. Investors reacted to local election results and global economic worries. The leading party (ANC) may form a coalition with a business-friendly party (DA), while talks with a more radical option (MK) seem unlikely. 1Y trend: "Up"
Turkey's inflation hit a new 18-month high in May at 75.45%, exceeding expectations. Housing costs skyrocketed, driving the surge. While food and most goods remained very expensive, some sectors like transportation saw a slight price slowdown. The core inflation rate also dipped slightly. Monthly price increases held steady. 1Y trend: "Up" (Tuik)

Currencies

The Euro is down as investors expect the ECB to cut interest rates by 0.25% this week, for the first time in years (since 2016). This would widen the gap between European and US rates. The ECB will reveal its plans on Thursday, with markets still anticipating two rate cuts in 2024 despite recent inflation concerns. 1Y trend: "Side"
Mexico's peso weakened to a near 7-month low after the Moderna party's big win in congressional elections. Investors worry the party's control could lead to more government control of the economy and hinder reforms. This follows concerns over President-elect Sheinbaum's plans to continue some of her predecessor's policies. 1Y trend: "Side"

Commodities

WTI crude oil prices fell sharply to 74.5 after OPEC+ announced a plan to slowly increase production by over 1.8 million barrels per day over the next year. This comes amid concerns about slowing economic growth and high interest rates, which could dampen demand for oil. 1Y trend: "Side"