See the ‘Market Data’ post.
Risk assets finished a touch lower on triple witching options expiry day, and the S&P 500 accumulated two weeks of marginal declines. The $ traded sideways this week while benchmark yields fell and crude oil rallied as the conflict in the Middle East escalates.
Sentiment continues to be driven by the new war and Trump’s updates on how Washington will participate. Israel warned that the war could be lengthy and that air strikes may not be enough to eliminate Iran’s uranium enrichment risk. Trump said he was not demanding Tel Aviv for a cease-fire, has ruled out sending US forces into Iran’s territory for now, and will decide whether and how to help Israel within two weeks. Tehran’s defiant posture led to a break in negotiations with Brussels and Trump said Iran prefers to deal with the US instead.
In central bank action yesterday, the Bank of England maintained its base rate steady, as expected, at 4.25% although three out of nine members of the committee opted for a 25bp cut. The BoE highlighted that the economy is showing signs of weakness and labour conditions have continued to loosen, signalling a potential rate cut at its next meeting.
Also, the Swiss National Bank cut its benchmark rate by 25bp to 0.0%, as widely expected, to fight deflation and an appreciating Swiss franc (+10% YTD vs $). Annual inflation fell to -0.10% YoY in May, the first negative print in four years.
In Fed talk, Governor Chris Waller called for a rate cut as soon as next month as he does not expect Trump’s tariffs to impact inflation. Chief Powell acknowledged on Wednesday, when the FOMC met, that there was a “pretty healthy diversity of views on the committee”. The rate target at a 4.25 to 4.50% range is considered to be above the so-called neutral level, which neither accelerates nor slows the economy.
In earnings updates before the market opened today, global IT consulting firm Accenture (mcap $178bn) beat revenue ($17.7bn, +8% YoY ) and profit ($2.2bn, +13% YoY) estimates but shares declined sharply (7%) after it announced leadership changes and a drop another fall in bookings (-7%).
Groceries chain Kroger Co (mcap $47bn) missed sales ($45bn, flat YoY), and beat earnings ($866mn, -8.6% YoY) estimates. However, shares rallied over 9% on the back of an improved full fiscal year outlook and investors recognized the resilience of Kroger in a tight consumer spending environment.
Economic data updates: inflation in Japan hit the highest level since October 2022 with core CPI running at 3.7% YoY and headline CPI accelerating to 3.5%. China kept its benchmark loan prime rates (LPR) steady, as expected, at 3% for 1-yr and 3.5% for 5-yrs. Germany’s producer prices declined 1.2% YoY, in line with expectations and UK retail sales unexpectedly fell 1.3% YoY, the worst reading in twelve months.
In corporate deals, the Buss family which controls the LA Lakers team is in talks to sell its majority stake to the CEO of Guggenheim Partners at a $10bn valuation, which would be the largest deal of a sports team.
Home Depot (mcap $348bn) made an approach to acquire building-products distributor GMS Inc (mcap $3.8bn) that could exceed the unsolicited bid made by distributor QXO (mcap $14bn) for $5bn. GMS shares jumped 25% today and are 19% higher YTD.
Bank of Montreal (mcap $76bn) has agreed to acquire independent wealth manager Burgundy Asset Management in a $456mn all-stock deal.
In business, the White House announced a third extension deadline for China’s ByteDance to divest TikTok assets in the US for another three months. Also, giant Alphabet was hit with a €4bn fine by the European Court of Justice for using its Android operating system to hurt rivals. Shares fell 3.6% today and accumulated a 12% drop this year.
Enjoy your weekend.
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