Quiet start for equity markets

US markets were closed for the Juneteenth Federal holiday, but that doesn’t mean we face a quiet week ahead. My colleague John Kicklighter notes the summer doldrums, in which the S&P 500 is typically unchanged and the VIX volatility index falls during June. However, don’t rule out surprises. Market concentration and tech leadership continues to worry traders. 

Bottom line – risk-off.

We don’t even have a breather in interest rate speculation until the Fed next reviews rate rises in July. Fed chairman Jerome Powell is to testify before the House Financial Services Committee on Wednesday and the Senate Banking Committee on Thursday morning as part of his semi-annual testimony. His speech will be followed for hints about the second half path of interest rates.

TODAY’S MAJOR NEWS

China growth forecasts dip, diplomacy moves ahead

Chinese President Xi Jinping met US Secretary of State Antony Blinken in Bejing and they agreed to stabilize their rivalry so it doesn't veer into conflict. Both stressed the importance of avoiding  conflict between the world's two largest economies, which would create global disruption. However, the two sides didn’t move their positions over Taiwan, trade, chip industry sanctions, human rights or Russia's war against Ukraine. Still jaw-jaw is better than war-war, Winston Churchill's famous maxim concerning the desirability of dialogue over destruction.

China’s economy faces a difficult recovery from its Covid lockdown, as we’ve noted in recent weeks. Leading investment banks are cutting GDP forecasts to 5.0% for this year and next year, modest by Chinese standards. Political harmony will be welcomed by commodity markets, for which China is key consumer, but slower growth could temper enthusiasm.

TODAY’S MAJOR MARKETS

Equity markets

• Absent US markets, we look abroad. Canada’s TSE was down 0.2% in morning trade
• The VIX, Wall Street's fear index, rose 5% to 14.2
• In Asia, the Nikkei and Hang Seng indexes were down 1.0% and 0.6%
• In Europe, the DAX and FTSE 100 indexes were down 1.0% and 0.7%
• China, which is seeing slowing economic growth, saw a 0.5% fall in the Shanghai Composite index and its worth noting that the market is up less than 5% year-to-date

Currencies and Bonds

• The dollar index rose 0.3% to 102.1
• Euro and sterling x-rates versus the dollar were both down 0.2%
• US bond markets were closed
• Crypto markets rallied saw so-called alt-coins rally strongly, with the CMC Crypto 200 index up 3.6%, but Bitcoin was unchanged after a strong 5-day move

Commodities

• Gold prices fell 0.5% to $1,962 per ounce
• Crude oil prices 0.9% to $71.1 per barrel

Paul Walton, Financial Writer. [email protected]