Good news is Bad news (US GDP beats expectations but stocks falter)

TL;DR: US economy grows 2% (good news); however, this heightens investor concerns that the Fed might keep interest rates higher for longer (bad news) which results in mixed stock performance.

📰 What’s moving markets?

• US stocks are mixed with S&P 500 gaining 0.45% on the back of US GDP beat yesterday while the Nasdaq 100 lost 0.16% over concerns that the Fed might keep interest rates higher for longer given the strength of the US economy.

• Q1 US GDP printed at 2% annualised (expectations: 1.4%) yesterday; however, Gross Domestic Income (GDI) contracted 1.3% during the same period. In theory, GDI and GDP should be the same, but differences can arise due to lags or inaccuracies in the data sets.

• 10 yr US Treasuries yields reached a 3 month high of 3.868% on Thursday and have since moderated to 3.85% in early trading. The US yield curve remains heavily inverted with 2yr treasury yields at 4.81%.

• The Japanese Yen fell to 145 dollars for the first time since November 2022 as investors expect Japan to maintain it’s ultra-low base rate policy.

• H&M was up 18% yesterday on strong sales and Q2 revenue beat while Overstock rallied 16% on completion of a deal to purchase Bed Bath & Beyond brand.

📊 Chart of the day

The four week moving average of bankruptcies in the US is reaching levels last seen during the GFC and Covid-19 pandemic.

Bankruptcies in the US (companies with >$50m liabilities)

📅 Coming up this week

Monday 26th June

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Tuesday 27th June

• Japan BoJ Core CPI (YoY) expected: 3.4%, last; 3.0%, actual: 3.1%

• Canada Core CPI (YoY) expected: 3.9%, last: 4.1%, actual: 3.7%

• US Housing Price Index (YoY) expected: 3.1%, last: 3.6%, actual: 3.1%

• Australia Headline CPI (YoY) expected: 6.1%, last: 6.8%, actual: 5.6%

Wednesday 28th June

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Thursday 29th June

• Euro Zone Consumer Confidence expected: -16.1, last: -17.4, actual: -16.1

• Germany Headline CPI (YoY) expected: 6.3%, last: 6.1%, actual: 6.4%

• US GDP (QoQ) expected: 1.4%, last: 1.3%, actual: 2%

• Japan Unemployment Rate expected: 2.6%, last: 2.6%, actual: 2.6%

Friday 30th June

• UK GDP (QoQ) expected: 0.1%, last: 0.1%

• Euro Zone Core CPI (YoY) expected: 5.5%, last: 5.3%

• Euro Zone Headline CPI (YoY) expected 5.7%, last 6.1%

• Canada GDP (MoM) expected: 0.2%, last: 0.0%

📈 The markets at a glance