Markets finished the day essentially flat as investors remain focused on CPI due out later this week.
The Dow Jones closed down 0.03 per cent, the S&P 500 ticked down by 0.04 per cent and the Nasdaq just tipped into positive territory to close 0.03 per cent higher at the close.
Treasury yields rose as traders remain wary of a surprise CPI print on Wednesday. The 10-year Treasury note rose 4 basis points to 4.42 per cent
March CPI due on Wednesday is seen as a key piece of news that will determine whether and when the Fed will begin to lower rates. Economists surveyed by Bloomberg forecast Wednesday’s consumer price index will show some easing of inflation pressures. Yet the core gauge, which excludes food and energy costs, would still be up 3.7 per cent from a year earlier, above the Fed’s 2 per cent target.
In company news, Tesla shares gained 4.9 per cent after CEO Elon Musk said the company’s robotaxi will be unveiled in early August.
Oil prices fell as traders monitored Middle East negotiations. A Hamas official said no progress had been made on Gaza ceasefire talks in Cairo while the Israeli Prime Minister said a date was set for an invasion of Rafah, the enclave’s last refuge for displaced Palestinians.
The upcoming March CPI report, anticipated to be released on Wednesday, is drawing heightened interest due to a stronger US growth outlook, adjustments in Fed pivot expectations towards hawkishness, and previous comments by Powell regarding potential seasonal impacts on inflation data earlier in the year. Market expectations suggest a 0.3 per cent month-over-month increase in both headline and core readings; if realised, core CPI would rise by 3.7 per cent year-over-year, a slight decrease from February and the smallest gain since April 2021.
Investors are increasingly scaling back expectations for interest rate cuts by the US Federal Reserve in 2024, reflecting confidence in the need for the central bank to maintain higher borrowing costs to counter inflationary pressures amidst robust economic data. Market sentiment now anticipates two quarter-point rate cuts by the Fed this year, with only a 50 per cent chance of a third cut, contrasting starkly with initial projections at the beginning of the year, which foresaw between six and seven cuts.
Global stock market concentration has surged to unprecedented levels, posing heightened risks for passive investors. The MSCI All Country World Index's top 10 stocks now represent 19.5 per cent of the benchmark, a stark increase from less than 9 per cent in 2016 and surpassing the dotcom era peak of 16.2 per cent in March 2000. Moreover, in the MSCI World Index covering developed markets exclusively, the 10 largest American companies now constitute 21.7 per cent of total market capitalisation, propelling the US share of the index to nearly 71 per cent.
The global supply of public equity is shrinking at its fastest pace in 25 years, with JPMorgan analysts attributing this decline to economic and geopolitical uncertainties. Despite favourable market conditions, companies are opting for extensive stock buybacks instead of issuing new shares, reflecting a persistent lack of executive confidence.
Turning to US sectors, Real Estate was the best performer overnight. Energy was the worst.
In crypto-related news, Bitcoin and other cryptocurrencies surged on Monday with Bitcoin nearing $72,000, garnering attention ahead of its upcoming halving event, where the issuance of new tokens is halved every four years, historically resulting in price increases. However, the dynamics leading into this halving differ significantly from previous ones, as Bitcoin was valued around $9,000 before the 2020 halving, compared to its recent record high of nearly $74,000.
Futures
The SPI futures are pointing to a 0.5 per cent gain.
Currency
One Australian dollar at 7.40am was buying 66.05 US cents.
Commodities
Gold added 0.24 per cent. Silver gained 1.11 per cent. Copper rose 0.94 per cent. Oil fell 0.55 per cent.
Figures around the globe
European markets closed higher. London’s FTSE added 0.41 per cent, Frankfurt gained 0.79 per cent, and Paris closed 0.72 per cent higher.
Turning to Asian markets, Tokyo’s Nikkei gained 0.91 per cent, Hong Kong’s Hang Seng added 0.05 per cent and China’s Shanghai Composite lost 0.72 per cent..
Yesterday, the Australian share market closed 0.20 per cent higher at 7,789.08.
Ex-dividends
Brickworks Limited (ASX:BKW) is paying 24 cents fully franked
Katana Capital (ASX:KAT) is paying 0.5 cents fully franked
Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.
