Stocks to more fresh highs encore, Nvidia tops the lot

Headlines

* Nvidia surpasses Microsoft to become most valuable public company

* Nasdaq, S&P 500 make more all-time highs as chips lead

* Goldman sees US jobs at inflection point, sticks to two-cut call

* Euro political risk premium abates, for now, as French bonds steady

FX: USD was virtually unchanged in quiet trade, printing a doji candlestick. Prices are sitting on the 50-day SMA at 105.20. Friday’s top is 105.80. US retail sales missed estimates as lower gasoline prices weighed. Inevitably, tighter financial conditions could be hitting consumer activity. That said, Treasury yields hit fresh 9-week lows.

EUR was flat with French bonds stable. We note that EUR/CHF, a proxy for European political tension made fresh cycle lows. Positioning for Thursday’s SNB is also worth watching. The German ZEW survey showed a smaller than expected improvement. Gains through .108 are really needed to stop the bearish momentum.

GBP also traded in a narrow range as markets looked ahead to today’s CPI data. Elevated core and services inflation needs to cool to see rate cuts from the BoE. The recent low is at 1.2656.

USD/JPY edged very marginally higher. We wrote yesterday, “is this an inevitable move towards 160?” The recent top is 158.25. BoJ Governor Ueda was on the wires suggesting the potential for a July rate hike was dependent on the data.

AUD outperformed on RBA day as the bank noted the lingering upside risks to inflation. Governor Bullock admitted the Board talked about hiking rates at this meeting.   CAD was little changed but has now seen three modest closes lower in a row. The most recent CFTC futures data showed hedge funds and speculators holding a record net short position in the loonie.

US Stocks: Wall Street’s main indices posted fresh all-time highs for a seventh consecutive day on the benchmark S&P 500 and Nasdaq. The blue-chip S&P 500 finished up 0.25% at 5,487. The Nasdaq 100 settled higher by 0.03% at 19,908. The Dow closed up 0.15% at 38,834. Nvidia climbed 3.5% to overtake Microsoft as the most valuable public company. That follows it joining the $3 trillion market cap club and overtaking Apple earlier this month. Chip stocks led the gains, but Apple, Alphabet, Amazon and Meta closed in the red. Citigroup raised their year-end target for the S&P 500 to 5,600 from 5,100.

Asian Stocks: APAC futures are in the green. Asian stocks were helped by the fresh record highs seen Stateside. The ASX 200 was helped by financials as attention turned to a mildly more hawkish RBA. The Nikkei 225 made back some of the prior day’s losses. The Hang Seng couldn’t keep above 18,000, while the mainland was more upbeat after the PBoC increased its liquidity efforts.

Gold climbed as yo-yo price action continued. Bond yields hit multi week lows with the 10-year Treasury moving closer to 4%. The World Gold Council survey highlighted that 29% of central banks plan to increase reserves. That’s the highest since the survey began in 2018.  

Day Ahead – NZ GDP, UK CPI

First quarter New Zealand GDP is expected to edge back above zero. Some economists expect a decline, which would mark the fifth drop in the last six quarters. This isn’t likely to move the needle dramatically regarding RBNZ policy, with the first rate cut not seen until the end of the year.

Markets will also be on watch for the UK’s May CPI data which could affect the bias in terms of guidance of Thursday’s Bank of England meeting. Expectations are for the headline to hit the bank’s 2% target, which would be just above their forecast of 1.9%. This will be driven down by good prices as lower energy prices filter through the supply chain. The core is predicted to print at 3.5% and the MPC’s key metric, services inflation, is forecast at 5.5%, down from the prior 5.9% but still sticky.

Chart of the day  – NZD/USD holding support

The kiwi, as always, will continue to be driven by external factors, though domestic factors remain supportive. The RBNZ is one of the major central banks who will likely be the last to ease policy. With second quarter inflation and jobs data not released until July and August, rate cuts may not happen until late in the fourth quarter. NZD could also outperform, aside from a hawkish RBNZ, if US price data starts to roll over.

The upward bull channel in NZD/USD since the April low at 0.5852 has stalled very recently. Prices have found support at the midpoint of this year’s high to low at 0.6110. Support below sits in a zone with long-term SMAs and the next retracement level around 0.6050. Initial resistance is the next Fib level at 0.6171 with long-term resistance from March and February around 0.6218.