Investors are fixing their profits on indices. The Turkish lira reached another low

At the close of the stock market yesterday, the Dow Jones Index (US30) gained 0.27%, and the S&P 500 Index (US500) fell by 0.38%. The NASDAQ Technology Index (US100) closed negative 1.28% on Wednesday. According to analysts, hedge funds are fixing their positions on the last rally before the key economic and political events next week.

The US trade deficit widened in April to its highest level in six months as exports declined at the fastest pace since the pandemic began and imports widened. The trade deficit in goods and services rose by $14 billion, or 23%, from the previous month. The broader deficit implies that trade will be subtracted from the gross domestic product in the second quarter. That means second-quarter GDP growth will be between 0 and 1%.

JPMorgan's experts pointed to the emerging signs of de-dollarization in global foreign exchange reserves and central bank reserves. While the dollar accounts for the lion's share – 88% of the volume of foreign exchange, and its share in trade accounts also remains stable – between 40% and 50%. However, the share of the US itself in world trade has declined, and the country's exports have fallen to a record low of 9%. The dollar's main competitor admittedly remains the yuan, although its international presence remains small: compared to the dollar's 43% share of SWIFT payments, the yuan's share is 2.3%.

According to Goldman Sachs, the benchmark S&P 500 index is poised for big gains on the back of the increasing adoption of AI-based technologies in the US. Widespread adoption of AI is expected within ten years. The uncertainty is mainly related to possible productivity gains and the ability of firms to convert AI into increased margins. Nvidia (NVDA) is an example of the potential impact on corporate profits through AI technology.

Following the Reserve Bank of Australia, Canada's central bank raised its benchmark rate by 25 basis points to 4.75%, the highest level in 22 years, because of growing fears that inflation could get stuck well above the 2% target amid consistently strong economic growth. The tone of the statement was rather hawkish. The Canadian dollar was also supported by data showing that Canadian exports jumped by 2.5% in April to an all-time high in volume.

Equity markets in Europe were mostly down yesterday. Germany's DAX (DE30) fell by 0.20%, France's CAC 40 (FR40) lost 0.09% on Wednesday, Spain's IBEX 35 (ES35) added 0.57%, Britain's FTSE 100 (UK100) closed down by 0.05%.

The Turkish lira fell by 7% to a record low as the recently elected government loosened measures to stabilize the currency. The lira came under pressure after President Tayyip Erdogan's re-election on May 28. It hit a record low of 23.16 against the dollar on Wednesday, bringing its losses so far this year to more than 19%.

Oil prices rose about 1% Wednesday as Saudi Arabia's plans to significantly cut production more than offset demand problems caused by rising US fuel inventories and weak Chinese export data. The US crude oil inventories fell about 450,000, according to the Energy Information Administration, compared with estimates of 1 million units.

Gold began to catch up to the dollar as central banks bought the commodity in record volumes. Gold now accounts for 15% of total assets compared to 44% for the dollar.

Asian markets traded flat yesterday. Japan's Nikkei 225 (JP225) was down 1.82% for the day, China's FTSE China A50 (CHA50) decreased by 0.63%, Hong Kong's Hang Seng (HK50) was up 0.83% for the day, India's NIFTY 50 (IND50) added 0.68%, and Australia's S&P/ASX 200 (AU200) was negative 0.16% for the day.

China's major banks cut interest rates on yuan-denominated deposits on Thursday, which could ease pressure on profit margins and lower the cost of lending, providing some relief for the financial sector and the economy as a whole. State-backed banks cut rates on demand deposits by 5 basis points and on three- and five-year term deposits by 15 basis points.

S&P 500 (F) (US500) 4,267.52 −16.33 (−0.38%)

Dow Jones (US30)33,665.02 +91.74 (+0.27%)

DAX (DE40) 15,960.56 −31.88 (−0.20%)

FTSE 100 (UK100) 7,624.34 −3.76 (−0.049%)

USD Index 104.13 −0.02 (−0.02%)

• – Japan GDP (q/q) at 02:50 (GMT+3);
• Australia Trade Balance (m/m) at 04:30 (GMT+3);
• – Indian Interest Rate Decision (m/m) at 07:30 (GMT+3);
• – Eurozone GDP (q/q) at 12:00 (GMT+3);
• – US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
• – US Natural Gas Storage (w/w) at 17:30 (GMT+3).

by JustMarkets, 2023.06.08

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.