Renewed data pressure in global markets
While bond yields rose following the strong PMI data announced on Thursday in the USA, investors postponed the pricing of the first interest rate cut from November to December.
Stocks and bonds in the USA fell as the announced data strengthened the expectation that the Fed would remain on hold.
Nvidia Corp. The S&P 500 index, in which all mega companies except the one fell below 5 thousand 300. The shares of the giant chip manufacturer exceeded the critical thousand dollar mark, rising over 9 percent with the support of the announced strong balance sheet and expectations. Dow Jones Industrial Average: Boeing Co., which announced it will continue to burn cash this quarter and throughout the year. It lost 1.5 percent of its value, led by the decline in its company.
The MSCI Asia Pacific Index had its worst day since May 8, with stock markets falling in almost every region from Hong Kong to China, from Japan to Australia, and is preparing for the first decline in the last five weeks.
US futures rose after the S&P 500 posted its biggest decline this month on Thursday. Bloomberg Dollar Index continues its rise throughout the week to a limited extent this morning.
Strong data in the USA increased bond yields
In the USA, S&P Global Manufacturing PMI data for May was announced above both expectations and April data with 50.9, while services PMI data was well above expectations with 54.8.
The S&P Global composite PMI index increased by more than 3 points and reached its highest level since April 2022 at 54.4.
Weekly unemployment benefit applications also remained below the previous week at 215 thousand. While these data showed that economic activity in the USA was strengthening and the labor market was tightening, investors’ expectations regarding the timing of the Fed’s interest rate cuts were postponed to the end of this year and bond yields increased.
The two-year U.S. bond yield, which is sensitive to Fed policies, rose more than 8 basis points to 4.955 percent, its highest level since May 2, before easing some late in New York. Meanwhile, yields across all maturities rose by at least 5 basis points, causing the yield curve to flatten. US markets will be closed on Monday for a public holiday, entering a three-day long weekend.
For this reason, transaction volume remained below average. Overnight index swap contracts based on upcoming Fed decisions are currently pricing in a quarter point interest rate cut with a 100 percent probability for December. Before the data was announced, this expectation was priced for November.