US Markets Higher, but China Concerns Hit Sentiment – Dow Up 1%
US stock indices surged to fresh record levels on Friday, with the Dow and S&P notching new highs. Strong earnings from the banking sector, coupled with a weaker Producer Price Index (PPI) print, suggested more Federal Reserve rate cuts ahead. The Dow closed up 0.97%, followed by the S&P, which gained 0.61%. The Nasdaq lagged slightly, rising 0.33% by the close of trading in New York. US Treasury yields retreated after the data release, with the 2-year yield dropping 5.4 basis points to 3.945%, and the 10-year yield down 2.1 basis points to 4.073%.
Currencies traded in tight ranges, with the US Dollar Index (DXY) inching up just 0.03%. Meanwhile, oil prices drifted lower, with Brent down 0.45% at $79.04 and WTI slipping 0.38% to $75.56 per barrel. Gold moved higher, gaining 1.1% to close at $2,658.42 an ounce after the US data release.
Chinese Markets in Focus Today
Chinese markets are under increased scrutiny today following two updates over the weekend that have failed to impress investors. China’s Finance Ministry was expected to provide more clarity on additional stimulus measures, but Finance Minister Lan Fo’an’s lack of detail left investors disappointed. While talk of support for the property sector and increased government borrowing is positive, traders are concerned about the lack of specifics. This could lead to a volatile start for Chinese indices this week.
Adding to the uncertainty, China’s latest inflation data fell short of expectations. The Consumer Price Index (CPI) printed at 0.4%, below the expected 0.6%, and the Producer Price Index (PPI) came in at -2.8%, worse than the expected -2.5%. These figures could further pressure Chinese markets when they open later this morning.
Thin Trading Conditions Expected Amid Holidays
Trading is expected to be thin today due to holidays in the US, Canada, and Japan, which will likely reduce market liquidity. In typical circumstances, investors might anticipate subdued trading ranges, but given the current geopolitical risks and weekend updates from the Chinese Finance Ministry, there’s a fear that markets could see volatile swings.
While there’s little on today’s macroeconomic calendar across the trading sessions, later comments from Federal Open Market Committee (FOMC) members Kashkari and Wallers could influence US market movements.
