US Stocks Drive Higher on Final Day of the Quarter – Nasdaq up 1.5%
US financial markets extended their strong run overnight, with equity indices finishing higher once again to cap one of their strongest quarters in recent years. Investor sentiment remained firmly supported by optimism surrounding the US economic outlook, with the S&P 500 and Nasdaq both recording their best quarterly performances since 2020. The Dow Jones Industrial Average rose 0.36% to close at 52,319, while the S&P 500 gained 0.79% to finish at 7,499. Technology stocks continued to lead the advance, pushing the Nasdaq up 1.52% to 26,213.
The first key labour market release of the week reinforced the view that the US economy continues to display resilience, with stronger-than-expected job openings prompting investors to increase expectations for near-term Federal Reserve rate hikes. Treasury yields moved sharply higher as a result, with the 2-year Treasury yield climbing 6.8 basis points to 4.172% and the benchmark 10-year yield rising 9.1 basis points to 4.465%. The US dollar also edged modestly higher, with the US Dollar Index gaining 0.06% to finish at 101.17, although trading conditions remained volatile throughout the session.
Commodity markets were comparatively subdued. Oil prices drifted lower as traders continued to assess developments surrounding negotiations between the United States and Iran, with hopes that further diplomatic progress could reduce geopolitical tensions and improve the global supply outlook. Brent crude eased 0.31% to settle at US$72.92 per barrel, while West Texas Intermediate declined 0.92% to US$70.08. Gold also finished lower, slipping 0.22% to US$4,006.89 an ounce after briefly trading at a fresh annual low earlier in the session.
Yen in Focus Again for Traders as It Hits 40-year High
USDJPY is in focus again for traders as it continues to push higher on an almost daily basis. The Japanese authorities have continuously advised that they are monitoring the yen’s weakness, and although there have been signs of ‘smoothing’ action, most recently near the 162.00 level, we have not seen the kind of aggressive intervention that we saw earlier in the year. It hit a fresh 40-year high yesterday, and interest rate differentials are still pointing to more topside potential. A sustained break above these levels really does open the way for a big move higher; however, traders remain nervous of the intervention threat, which took the pair over 2% lower in a matter of minutes in late April. However, in the current environment, this should just provide better buying opportunities for bulls. Stronger US employment data and a more hawkish Kevin Warsh could see the pair drive higher in the short term, which is a real danger for the Ministry of Finance, so expect increased volatility in the coming days, one way or the other.
Central Bankers in Focus for Markets Today
Traders’ attention shifts to a busy day on the economic calendar later today, with central bank communication expected to dominate market sentiment. The ECB’s annual forum in Sintra will see European Central Bank President Christine Lagarde joined by Federal Reserve Chair Kevin Warsh, Bank of England Governor Andrew Bailey, and Bank of Canada Governor Tiff Macklem, with investors looking for any fresh guidance on the outlook for global interest rates. The focus will also remain firmly on the US labour market, with the release of ADP Employment Change data and the ISM Manufacturing PMI expected to provide further insight into economic momentum ahead of Friday’s closely watched Non-Farm Payrolls report.
