June S&P 500 futures (ESM23) are up +0.16%, and June Nasdaq 100 E-Mini futures (NQM23) are up +0.21% this morning after three major U.S. benchmark indices rallied on Wednesday as hopes of a deal to raise the U.S. debt limit and a jump in regional bank stocks boosted risk appetite.
In Wednesday’s trading session, a surge in regional bank stocks lifted sentiment, led by a more than +10% jump in Western Alliance (WAL) after it reported Q2 deposit growth of over $2 billion as of May 12th, calming investor fears over huge outflows. Other regional bank stocks such as Comerica (CMA), Zions (ZION), and KeyCorp (KEY) were among the top percentage gainers on the benchmark S&P 500. Energy stocks also supported the broader market melt-up as the price of WTI crude rose more than +2%. In addition, Tesla Inc (TSLA) climbed over +4% and was among the top percentage gainers on the tech-heavy Nasdaq 100 following its annual shareholder meeting on Tuesday.
Economic data on Wednesday showed U.S. April housing starts unexpectedly rose +2.2% m/m to 1.401M, stronger than expectations of 1.400M. At the same time, U.S. building permits, a proxy for future construction, came in at 1.416M in April, weaker than expectations of 1.437M.
President Joe Biden and top U.S. congressional Republican Kevin McCarthy on Wednesday expressed their commitment to reaching an agreement to increase the federal debt limit and avert a potentially catastrophic U.S. debt default. House Speaker Kevin McCarthy stated on Wednesday that he doesn’t think the United States will default on its debt, although both parties have not reached an agreement yet. In addition, the White House confirmed a report that Biden would cut short his trip to Australia and Papua New Guinea and will return to Washington on Sunday to oversee debt ceiling talks with Republicans.
Meanwhile, major companies like Walmart (WMT), Applied Materials (AMAT), and Ross Stores (ROST) are set to report their quarterly earnings today.
Today, all eyes are focused on the U.S. Philadelphia Fed Manufacturing Index in a couple of hours. Economists, on average, forecast that the May Philadelphia Fed Manufacturing Index will stand at -19.8, compared to the previous value of -31.3.
Also, investors are likely to focus on U.S. Existing Home Sales data, which was at 4.44M in March. Economists foresee the new figure to be 4.30M.
U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 254K, compared to last week’s value of 264K.
In addition, investors will likely focus on speeches from Fed Governor Philip Jefferson and Dallas Fed President Lorie Logan for fresh insights on the Fed’s monetary policy trajectory.
In the bond markets, United States 10-Year rates are at 3.597%, up +0.42%.
The Euro Stoxx 50 futures are up +1.23% this morning as market participants were optimistic about a possible breakthrough in U.S. debt-ceiling negotiations. Gains in automotive, technology, and bank stocks are leading the overall market higher. Meanwhile, European Central Bank Vice President Luis de Guindos said Wednesday that the ECB has mostly finished its monetary-tightening campaign, but there is still “a way to go.” In the corporate sector, Bt Group Plc (BT-A.LN) plunged over -8% after the U.K.’s biggest network operator said it plans to cut its labor force by up to 42% by 2030.
The European economic data slate is mainly empty on Thursday.
Asian stock markets today settled in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.40%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +1.60%.
China’s Shanghai Composite today closed higher following two straight days of losses as investors snapped up banking and AI-related stocks after a deluge of weak economic data showed the country’s economic recovery was losing steam. Hong Kong-listed tech stocks also gained ground on Thursday, with Alibaba Group rising over +2% ahead of its earnings results. At the same time, Nomura downgraded its China full-year growth forecast to 5.5% from 5.9%. Nomura also slashed China’s 2024 GDP forecast to 4.2% from 4.4%.
Japan’s Nikkei 225 Stock Index closed sharply higher today, hitting a 20-month high as chipmaking investment plans and reasonable April trade data lifted market sentiment. Data on Thursday showed the country’s trade deficit narrowed by almost half in April. Meanwhile, Prime Minister Fumio Kishida met with the heads of the world’s largest chipmakers on Thursday to boost Japan’s domestic semiconductor sector. Executives from Micron Technology Inc. to Taiwan Semiconductor Manufacturing Co. said they would consider investing further in Japan. On the ground of this, shares of chip-testing equipment maker Advantest climbed about +8%. Other chip stocks also gained ground, with Tokyo Electron Ltd and Renesas Electronics Corp gaining over +5%. In other news, Sony Group Corp surged more than +6% after the conglomerate said it was considering spinning off and listing its financial division. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 3.13% and hit a new 1-month high of 17.78.
“Although exports have slowed from the previous month, this result was still relatively good compared to other northeast Asian countries. The April trade results further support our view that the Japanese economy will stay on a recovery path,” ING said in a note.
The Japanese April Exports stood at +2.6% y/y, weaker than expectations of +3.0%.
The Japanese April Imports came in at -2.3% y/y, weaker than expectations of -0.3%.
The Japanese April Trade Balance has been reported at -432.4B, stronger than expectations of -613.8B.
