In a session marked by mixed signals, European markets closed slightly lower on Wednesday, with the Stoxx 600 index ending in negative territory. Technology stocks led the losses, while mining stocks managed to edge higher. The UK’s FTSE 100 saw a modest rise after news that inflation hit the Bank of England’s target, aligning with expectations ahead of a crucial policy rate decision. Meanwhile, Asian markets showed strong performance, particularly in Hong Kong, which saw significant gains driven by energy and basic materials stocks. With US markets closed for Juneteenth, global investors turned their attention to regional developments and inflation data, setting the stage for a dynamic trading environment.

Key Takeaways:

  • Stoxx 600 Index Closes Lower: The Stoxx 600 index ended the session down 0.18%, with technology stocks leading the losses at a drop of 1.15%, while mining stocks added 0.65%, reflecting sectoral divergence within European markets.
  • FTSE 100 Ticks Up: The UK’s FTSE 100 rose by 13.82 points, or 0.17%, to close at 8205.11, recovering from earlier losses after inflation hit the Bank of England’s target of 2.0% for May. This aligns with expectations ahead of the BOE’s policy rate decision, where rates are anticipated to remain steady at 5.25%.
  • CAC 40 Index Falls: France’s CAC 40 Index declined by 64 points, or 0.84%, demonstrating the broader downturn across major European markets despite mixed performances in various sectors. Leading the losses were STMicroelectronics (-4.78%), Dassault Systèmes (-3.10%), and TotalEnergies SE (-1.70%) and the top gainers included Publicis (1.53%), Accor (1.45%), and Renault (1.34%).
  • Eurozone Inflation Increases: Annual inflation in the euro area rose to 2.6% in May from 2.4% in April, while inflation in the wider EU increased to 2.7% from 2.6%, according to Eurostat’s final readings.
  • Strong Performances in Asian Markets: Hong Kong markets led Asian gains with a nearly 3% jump, fuelled by energy and basic material stocks. Japan’s Nikkei 225 climbed 0.23%, with exports growing 13.5% year-on-year in May, exceeding expectations. South Korea’s Kospi gained 1.23%, driven by a 1.75% gain in Samsung Electronics. Taiwan’s Weighted Index rose nearly 2%, led by strong performances from Hon Hai Precision Industry and Taiwan Semiconductor Manufacturing Corp, which increased by 2.27% and 4.03%, respectively. Meanwhile, Mainland China’s CSI 300 dipped 0.47% to 3,528.75.
  • Canadian Market Declines: The Toronto Stock Exchange’s S&P/TSX composite index fell by 94.4 points, or 0.4%, to 21,516.90, hitting a near four-month low due to broad-based declines in industrial and financial shares.
  • US Mortgage Rates Drop: US mortgage rates fell below 7% for the first time since March, with the 30-year fixed mortgage rate decreasing to 6.94%, and the five-year adjustable-rate mortgage rate dropping to 6.27%.
  • Amazon Invests Heavily in Germany: Amazon announced an investment of 10 billion euros to expand its cloud and logistics operations in Germany, emphasising the rising demand for its services and the growth potential in Europe’s largest economy.

FX Today:

  • EUR/USD Shows Modest Recovery: The EUR/USD pair advanced marginally to retest the 1.0750 zone amidst the indecisive price action of the US Dollar. If the rebound gathers strength, the 200-day SMA at 1.0788 is the next target, followed by the weekly high of 1.0852. A breakout past these levels could expose the March peak of 1.0981 and the key 1.1000 threshold. Conversely, a decline might retest the June low of 1.0667, then 1.0649, and finally the 2024 bottom of 1.0601.
  • GBP/USD Climbs Above 1.2700: The GBP/USD pair tested a key support-turned-resistance trendline around 1.2720. After hitting a three-month high of 1.2860, it dropped over 100 pips, clearing the support trendline at approximately 1.2730. Key resistance levels are at 1.2739 and 1.2800, with the monthly high of 1.2860 in sight. Should GBP/USD drop below 1.2700, it could expose the May high turned support at 1.2643, followed by the 50-DMA at 1.2617, with further losses potentially taking it to 1.2600 and the 200-DMA at 1.2550.
  • USD/JPY Steadies Above 158.00: USD/JPY rose for the fifth consecutive session, though it failed to surpass the 158.00 barrier. The first key resistance level is 158.25, with the next targets being 158.44 and the YTD high of 160.32. On the downside, key support levels are at 157.00, 156.98, and 156.16, with further support at 155.93 and 155.52.
  • USD/CAD Holds Near 1.3700: USD/CAD eased back to the 1.3700 handle before stabilising, trading around the 200-hour EMA near 1.3725. Despite recent declines, the CAD has been returning low gains against the USD, closing flat or down for all but one of the last seven trading days. The pair remains above the 50-day EMA at 1.3675 and is firmly in bull territory above the 200-day EMA at 1.3578.
  • GBP/JPY Nears Decade-Plus Highs: GBP/JPY continued its upward momentum, trading near 201.00 in thin market conditions, close to 16-year highs of 201.60. The pair rebounded after briefly dipping below the 200-hour EMA at 200.20, and remains well above the 200-day EMA, which is rising towards 190.00. GBP/JPY has maintained its high side positioning since early 2024 and is up 12% for the year.

Market Movers:

  • Games Workshop Surges on Profit Forecast: Shares of Games Workshop (GAW-GB) climbed 9% after the British company projected a higher pre-tax profit of £200 million ($254.4 million) in its full-year trading update, indicating strong financial performance.
  • Teradyne Gains on Raised Price Target: Teradyne (TER) saw its stock rise over 4% after UBS increased its price target from $130 to $170, reflecting heightened investor confidence in the company’s growth prospects.
  • Micron Technology Jumps on Analyst Upgrade: Micron Technology (MU) closed up more than 3% following Bank of America’s decision to add the stock to its US 1 list, underscoring the positive outlook for the semiconductor manufacturer.
  • Constellation Energy Rises on Upgraded Price Target: Constellation Energy (CEG) shares gained over 3% after UBS raised its price target from $227 to $249, indicating strong expected performance in the energy sector.
  • Silk Road Medical Soars on Acquisition News: Silk Road Medical (SILK) soared more than 23% after Boston Scientific announced a definitive agreement to acquire the company for approximately $1.16 billion, or $27.50 per share, highlighting significant acquisition activity in the medical sector.
  • Kroger Upgraded and Gains: Kroger (KR) shares rose over 1% after BMO Capital Markets upgraded the stock to outperform from market perform, setting a new price target of $60, reflecting optimism about the grocery retailer’s future.
  • Ball Corp Declines on EPS Growth Target: Ball Corp (BALL) fell more than 6%, leading declines in the S&P 500, after announcing a long-term EPS growth target of over 10% at its investor day conference, which fell short of the 10-15% growth projection from the 2023 conference.
  • Moderna Drops on Insider Selling: Moderna (MRNA) shares decreased over 3%, leading the Nasdaq 100 losers, following reports of insider selling, including a $2.07 million share sale by President Hoge as disclosed in an SEC filing.
  • Tesla Declines on Compensation Announcement: Tesla (TSLA) dropped more than 1% after CEO Elon Musk revealed plans to offer stock-based compensation for top-performing employees, raising concerns about potential dilution.
  • Boeing Falls on Quality Control Issues: Boeing (BA) shares fell over 1%, leading the Dow Jones Industrial declines, after a company quality inspector reported the mishandling and misplacement of up to 400 faulty 737 Max aircraft parts, with some parts potentially installed on new planes.
  • Philip Morris Slips on Regulatory Issues: Philip Morris (PM) dropped nearly 1% after halting online sales of its flavoured nicotine pouch brand Zyn in the US, following a subpoena from the DC Attorney General related to banned flavoured nicotine products.

As the trading week progresses, the mixed performance across global markets highlights a landscape shaped by varied economic signals and investor sentiment. European stocks showed some resilience despite inflation data and policy expectations, while Asian markets, particularly in Hong Kong and Japan, benefitted from strong tech and export data. The decline in US mortgage rates and Amazon’s significant investment in Germany underscore ongoing shifts in economic activity and corporate strategies. However, challenges persist, as seen in the cautious movements of Canadian stocks and specific sector declines. Overall, the investors are keenly observing inflation trends, central bank decisions, and corporate earnings for further direction.