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Amazon invests $100m in AI but stocks in Asia fall following UK rate hike
🐮🐻 #10: Hang Seng and Nikkei 225 fall, Amazon and Ocado rally, GBP and TRY fall, Gold falls
TL;DR: Stocks in Asia fall following surprise UK and Turkey rate hikes while Amazon keeps the US market afloat.
📰 What’s moving markets?
Stocks in Asia are falling with the Hang Seng down 2.1% and Nikkei 225 down 2.5% in response to a week of hawkish central bank policy and economic growth concerns.
Amazon rallied 4.3% yesterday on an announcement that they are investing $100m in an generative AI center. This rally supported the S&P 500 and Nasdaq 100 which were up 0.4% and 1.2% respectively yesterday.
Ocado also rallied 40% but then fell to a 8.5% gain by the end of the day over rumors that Amazon may acquire the UK grocery delivery company.
The UK’s BoE hiked base rates 50bps (expectations: 25bps) to 5% yesterday. The pound rallied slightly on the initial surprise but then fell over concerns that the monetary tightening would bring economic pain. GBPUSD is currently trading at 1.27.
Turkey raised interest rates for the first time since 2021, by a staggering 650bps from 8.5% to 15%. This was in an attempt to restore the value of the nation’s currency; however, markets responded to the opposite effect, with the Lira down 1% against the dollar yesterday and over 35% year-to-date. The Turkish Lira is currently trading at 25.20 USDTRY.
US Treasuries yields rallied yesterday as the Fed Chair Powell reiterated that further rate hikes are likely. The US 10yr yield is at 3.78%. This has weighed on the price of gold which has fallen to $1,917 (unlike Treasuries, gold doesn’t pay a yield so can sometimes move inversely to US bond yields).
📊 Chart of the day
The BoE’s rate hike yesterday led to a greater rally in short duration gilt yields than long duration, as markets increased their short-term base rate expectations but grew concerned over long term growth prospects. This has caused greater inversion in the UK’s Yield Curve, with a 6 month gilt paying 5.8% p.a. and a 10yr gilt only 4.4% p.a.
What is an inverted yield curve? 🤔
An inverted yield curve shows that long-term interest rates are less than short-term interest rates. With an inverted yield curve, the yield decreases the farther away the maturity date is. Sometimes referred to as a negative yield curve, the inverted curve has proven in the past to be a reliable indicator of a recession.
📅 Coming up this week
Monday 19th June1
US NAHB Housing Market Index expected: 51, last: 50, actual: 55
Tuesday 20th June
Japan Industrial Production expected: -0.4%, last: 1.1%, actual: 0.7%
Euro Zone Current Account expected: 30.1B, last: 31.2B, actual: 4.0B
Wednesday 21st June
UK Core CPI (YoY) expected: 6.7%, last: 6.8%, actual 7.1%
UK Headline CPI (YoY) expected: 8.5%, last: 8.7%, actual 8.7%
UK Headline RPI (YoY) expected: 10.2%, last: 11.4%, actual: 11.3%
Canada Retail Sales expected: 0.2%, last: -1.4%, actual: 1.1%
Brazil Interest Rate Decision expected: 13.75%, last: 13.75%, actual: 13.75%
Thursday 22nd June
UK BoE Interest Rate Decision expected: 4.75%, last: 4.50%, actual: 5.00%
US Continuing Jobless Claims expected: 1,766k, last: 1,775k, actual: 1,759K
US Jobless Claims 4-Week Avg. expected: 242.01K, last: 246.75K, actual: 255.75K
Japan Core CPI (YoY) expected: 3.1%, last: 3.4%, actual: 3.2%
Japan Headline CPI (YoY) expected: 4.1%, last: 3.5%, actual: 3.2%
Friday 23rd June
Singapore CPI expected: 5.5%, last: 5.7%
Spain GDP (YoY) expected: 3.8%, last: 2.6%
📈 The markets at a glance
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