Market Volatility Persists as S&P 500 Approaches Milestone

US futures and European shares experienced fluctuations as the rally in megacap stocks, which had pushed the S&P 500 to the brink of a bull market, showed signs of fading.

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Apple Inc., Alphabet Inc., and Microsoft Corp. were expected to continue their decline in premarket trade, suggesting that the tech rally was losing momentum. Conversely, Danske Bank A/S saw a notable increase, contributing to the outperformance of the European financial sector, following a rotation into US financial shares the previous day.

The tech industry is facing challenges due to the potential for central banks to maintain higher interest rates for a longer period. This has dashed hopes for rate cuts later in the year, which has negatively impacted the momentum of megacap stocks. The Federal Reserve and the European Central Bank are scheduled to make policy decisions next week, with the Fed indicating a possible pause in June before resuming rate hikes.

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Karen Ward, Chief Market Strategist for EMEA at JPMorgan Asset Management, expressed concerns about the rates market's over-optimism regarding the central banks' ability to quickly cut rates. She believes that the pricing out of expected rate cuts poses a risk to the valuations of growth-oriented megacap tech companies.

European shares were also volatile, with the OECD warning of a weak recovery in the global economy due to persistent inflation and restrictive central bank policies. Additionally, disappointing data on Chinese exports raised further questions about global demand.

Hermes International weighed down the Stoxx 600 benchmark and was expected to decline for the third consecutive session. The confidence in the Chinese reopening trade has diminished, particularly affecting sectors such as luxury goods.

Craig Erlam, Senior Market Analyst at Oanda, noted the rapid fading of China's reopening boost and predicted increased pressure on leaders to implement new stimulus measures to revitalize the economy.

Danske Bank shares surged by up to 7.2% after the bank raised its profitability target and committed to dividend payouts, indicating a desire to move past a turbulent period marred by scandals. Inditex SA also experienced a significant increase, with its biggest jump in a year, thereby boosting the retail sector due to better-than-expected earnings from the Zara owner.

The FTSE 100 stabilized after initially declining when UK lender Halifax reported the first annual decline in house prices since 2012. However, builder Persimmon Plc. dropped by as much as 2.3%.

In currency markets, the Turkish lira tumbled to a record low against the dollar, falling approximately 7%. This decline came as policymakers hinted at scaling back interventions to support the currency. The appointment of former Merrill Lynch strategist Mehmet Simsek as the new Treasury and Finance Minister raised expectations of a return to orthodox monetary policy, potentially reducing market interventions.

A gauge of the strength of the US dollar decreased, and Treasury yields slightly rose following an announcement of a Treasury bill auction, which impacted short-dated US bonds.

The Securities and Exchange Commission expanded its crackdown on cryptocurrencies by accusing Coinbase Global Inc. of running an illegal exchange. This move could have implications for the industry's operations and US citizens' ability to trade. As a result, Bitcoin experienced a slight decline.

In the commodities market, gold prices dipped slightly, while oil fluctuated after giving up earlier gains prompted by news of Saudi Arabia's supply cut.

Key events to watch this week include US trade and consumer credit data, Canada's rate decision, EIA crude oil inventory data, Eurozone GDP, rate decisions in India and Peru, Japan's GDP, US wholesale inventories, and initial jobless claims, as well as China's PPI and CPI data.

Here are the major market movements:

Stocks

• S&P 500 futures increased by 0.1% as of 7:51 a.m. New York time.

• Nasdaq 100 futures rose by 0.1%.

• Futures on the Dow Jones Industrial Average remained relatively unchanged.

• The Stoxx Europe 600 rose by 0.1%.

• The MSCI World index showed little change.

• The MSCI Asia Pacific Index experienced minimal movement.

• The MSCI Emerging Markets Index rose by 0.7%.

Currencies

• The Bloomberg Dollar Spot Index fell by 0.2%.

• The euro rose by 0.2% to $1.0715.

• The British pound increased by 0.3% to $1.2465.

• The Japanese yen rose by 0.2% to 139.38 per dollar.

• The offshore yuan remained relatively stable at 7.1244 per dollar.

Cryptocurrencies

• Bitcoin fell by 0.6% to $26,791.13.

• Ether fell by 0.4% to $1,868.92.

Bonds

• The yield on 10-year Treasuries rose by two basis points to 3.68%.

• Germany's 10-year yield remained mostly unchanged at 2.37%.

• Britain's 10-year yield declined by one basis point to 4.20%.

Commodities

• West Texas Intermediate crude rose by 1.1% to $72.51 a barrel.

• Gold futures fell by 0.2% to $1,977.50 an ounce.

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