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Dollar struggles amid Fed rate cut chatter; US stocks set to rebound

➤ Australia central bank cuts key rate to new record low.

➤ Fed's Bullard says rate cut "may be warranted soon."

➤ U.S. antitrust probe threats trigger tech-stock rout.

➤ South Africa GDP posts largest drop in 10 years.

U.S. equities look set to reverse yesterday's tech-driven losses amid mixed global stocks trading, while the U.S. dollar struggled for traction on the back of growing expectations of an upcoming Fed rate cut.

The index that tracks the dollar's performance against a basket of peers swung between gains and losses after St. Louis Fed President James Bullard said yesterday that a rate cut "may be warranted soon" to spur inflation and guard against trade-related risks.

The comments from Bullard, widely seen as one of the most dovish voting members of the rate-setting Federal Open Market Committee, "likely represent a material development" to further undermine sentiment in the dollar, said Citi analysts in a note.

The dollar index was broadly unchanged at just under 97.2 at 6:30 a.m. ET, having dropped more than 1% earlier, as markets await a speech by Fed Chairman Jerome Powell later today at a two-day conference on monetary policy. The yield on 10-year Treasury notes rose 3 basis points to 2.10% after dropping to as low as 2.07% yesterday.

The euro pared earlier gains against the dollar to tick up nearly 0.1% as inflation in the single-currency area eased in May, while sterling and the yen both edged 0.1% higher.

Elsewhere, the Australian dollar was broadly steady against its U.S. counterpart after the Reserve Bank of Australia cut its cash rate by 25 basis points to a new low of 1.25% in a widely expected decision. The South African rand tumbled more than 1% after data showed the economy contracted 3.2% in the first quarter, the largest drop in about 10 years.

In equities, reports of potential U.S. antitrust probes into major American technology firms triggered a tech rout on Wall Street, sending the S&P 500 down 0.3% and the Nasdaq Composite 1.6% lower at yesterday's close. Facebook Inc. tumbled 7.5%, Alphabet Inc. plunged 6.1%, Amazon.com Inc. lost 4.6% and Apple Inc. fell 1% in the wake of the planned regulatory investigations.

U.S. stocks look set to bounce back as futures point to a higher open this morning, with shares in the four tech giants rising in pre-market trading.

European equities firmed by midday after a weak start to trading, with the Stoxx 600 index erasing earlier losses to rise 0.3%. Germany's DAX added nearly 1% while the U.K.'s FTSE 100 rose more than 0.2%, though shares in Royal Dutch Shell PLC dropped nearly 1% after the oil major announced plans to distribute $125 billion or more to shareholders from 2021 to 2025.

In Asia, shares were broadly lower as the MSCI Asia-Pacific ex-Japan index dipped 0.5%, while the Nikkei 225 was little changed. The Shanghai SE Composite index dropped nearly 1% and Hong Kong's Hang Seng fell 0.5%.

China and the U.S. continued to trade barbs over tariffs, with the U.S. accusing Beijing of playing a "blame game" in response to the Asian country's white paper on its stance in trade negotiations with Washington. Trade tensions between the world's two largest economies have weighed on American factory activity, with data from the Institute of Supply Management showing that the U.S. manufacturing sector expanded in May at its softest pace in nearly three years.

Meanwhile, Mexico is reportedly weighing retaliatory measures against the planned U.S. tariff hikes as talks between the two countries continue this week.

The yield on 10-year German Bunds slipped 1 basis point to negative 0.21%. Italian 10-year yields dropped 7 basis points to 2.51% as Prime Minister Giuseppe Conte announced his intention to step down if the two parties that make up the national government fail to resolve their feud.

In commodities, Brent crude oil fell 0.8% to $60.78 per barrel on the ICE Futures Exchange. Gold advanced 0.2% to $1,331.00 per ounce.

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Latin American currencies were worst emerging-markets performers in May

The day ahead:

8:30 a.m. ET — U.S. Fed's John Williams speaks

8:55 a.m. ET — U.S. Redbook

9:45 a.m. ET — U.S. Fed's Charles Evans speaks

9:55 a.m. ET — U.S. Fed's Jerome Powell speaks

10 a.m. ET — U.S. factory orders

3:45 p.m. ET — U.S. Fed's Lael Brainard speaks

6:45 p.m. ET — U.S. Fed's Robert Kaplan speaks

8:30 p.m. — Japan composite purchasing managers index

9:45 p.m. ET — China general services purchasing managers index