The US equity market recorded marginal gains on Wednesday as the economic recovery strengthens and inflationary pressures dominated market sentiments. Stocks in the communication, consumer discretionary and materials segment were responsible for the market’s weak performance as investors shifted attention to sectors that will benefit from reflation. The Dow rose by 26 points to 34,600.38, while the S&P 500 traded 6 points higher to close at 4,208.12. The Nasdaq Composite moved up by 20 points to 13,756.33. On Tuesday, manufacturing data revealed an expansion in factory activity, but a rise in supply challenges was also noticeable. On the bond market, the 10-year benchmark note slipped to by 1.599% from 1.613%.
The European market opened on the back foot, days after touching record highs as investors search for clues on probable monetary response with the US and European data releases in view. The pan-European STOXX 600 index fell by 1 point as cautious trading was observed.
Elsewhere in the EU, The UK and Australia are in free trade talks as both countries advance discussions in another round to have an agreement in place by mid-June. The UK, as one of its strategic goals post-Brexit, is chasing a deal with Australia to reinforce economic ties with the Indo-Pacific region. Both countries have agreed on a significant number of items for a deal to materialize, estimated to add 500 million pounds to the British economy over the long term.
In the Asian region, investors evaluate the threat of inflation on the market as stocks traded slightly below their recent highs. MSCI’s broadest index of Asia-Pacific shares outside Japan advanced by 711 points and reached highs last seen in March. Japan’s Nikkei soared by 4 points while the Australian index hits an all-time high as robust economic data reading impelled its solid performance on the day. We expect to see a weekly unemployment report and May’s private payroll data Today while the U.S monthly job figures will be released on Friday which investors will closely examine to ascertain its impact on the health of the world’s largest economy.
Oil prices strengthened for a third consecutive day in anticipation of improving demand dynamics predicated on easing of the lockdown and travel restrictions coupled with encouraging signs of recovery in major developed markets such as the U.S, Europe and China. OPEC+ and market participants are of the view that demand will outstrip supply in the second half of the year as countries, especially in Europe and the U.S, allow fully vaccinated citizens to travel for the summer. Data from OPEC+ indicates that demand will be ahead of supply by 2.3 million barrels per day (BPD) by year-end with demand at 99.8 million BPD. U.S. West Texas Intermediate crude futures added 5 points to trade at $69.17 a barrel while Brent advanced by 6 points trading at $71.75 a barrel.