Shares bounce back as upbeat economic data allays slowdown fears

A stronger-than-expected consumer confidence report Tuesday renewed investors’ optimism in the US economy and helped inspire a broad rally in equities, with resurgent big tech companies pulling the S&P 500 and Nasdaq Composite back from the two-week lows hit just a day before.  Meantime, European shares closed with marginal changes yesterday, influenced by comments from ECB Chief Christine Lagarde regarding interest rates. 

Summary for 28.06.2023 

• Most Asian shares rose on Wednesday following positive Australian data and strength on Wall Street, although anticipation of more cues on monetary policy and key Chinese economic readings kept investors on their toes. 
• European equity markets look set for gains at the open while US futures eased overnight, dragged by a Wall Street Journal report that said the US was considering new restrictions on the export of artificial intelligence chips to China. 
• Oil prices rose slightly in early morning trade after data suggested that US crude inventories shrank in the past week, although anticipation of more cues on global interest rates kept traders on edge.  Crude prices were nursing steep losses over the past five sessions, amid persistent concerns that rising interest rates will weigh on economic activity and erode crude demand. 

• The monthly Consumer Price Index in Australia rose by 5.6% in the year to May, slowing from a 6.8% rise in April and falling short of the market consensus of 6.1%.  It was the lowest print since April 2022, due to a slowdown in prices of both housing and transport.  The monthly CPI indicator, excluding volatile fruit and vegetable items and fuel, was down to 6.5% in May from 6.5% in April. 
• Annual profits at China’s industrial firms extended a double-digit decline in the first five months as softening demand squeezed margins, reinforcing hopes of more policy support to bolster a stuttering post-Covid economic recovery.  The 18.8% year-on-year slump in profits came on top of the 20.6% contraction in January-April and added to evidence of an economy that was losing steam on many fronts in May including retail sales, exports and property investment as the youth jobless rate scaled a fresh high of 20.8%. 
• A flurry of data published yesterday showed surprising strength in several corners of the US economy. Purchases of new homes climbed to the fastest annual rate in more than a year, durable goods orders topped estimates and consumer confidence reached the highest level since the start of 2022, according to the Tuesday reports. While the data don’t reject the possibility of a recession in the coming year, they do give reason to believe a downturn isn’t right around the corner. 
• Inflation in the Euro Area is too high and is set to remain so for too long, ECB President Christine Lagarde said yesterday during the ECB Forum on Central Banking in Portugal.  Wage growth is now pressuring inflation which is entering a second stage and is set to linger for some time.  Lagarde added that it is unlikely that in the near future, the central bank will be able to state with full confidence that the peak rates have been reached. 
• Delta Air Lines yesterday forecasted full-year earnings of $6 per share – at the high end of a range it offered this spring – and said it had been helped by strong demand and customers opting for more expensive fare classes.  Shares of the airline rose nearly 7% on Tuesday 

• Kellogg shares were upgraded to “buy” from “neutral” by Goldman Sachs, which said the company’s share price didn’t reflect its growth potential.  Kellogg shares ended about 1.7% higher. 
• Nike shares had their “outperform” rating reiterated by Oppenheimer ahead of the apparel company’s earnings later this week.  Nike shares rose 1.7% 
• UBS is planning to cut more than half of Credit Suisse’s 45,000-strong workforce starting next month as a result of the bank’s emergency takeover.  Bankers, traders and support staff in CS’s investment bank in London, New York, and in some parts of Asia are expected to bear the brunt of the cuts, with almost all activities at risk.  Staffers have been told to expect three rounds of cuts this year.