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Monday Market Minutes: Pregnant pauses

Wall Street stocks fell Friday as Republicans twice halted the debt ceiling negotiations, stoking doubt about a deal being reached before the June 1 deadline.

But the S&P 500 still had its best week since March, while in Tokyo the Japanese stockmarket went booming onwards and upwards.

The Dow dropped 109.28 points, or 0.33%, to 33,426.63. The S&P 500 slipped 0.14% to 4,191.98. The Nasdaq slid 0.24% to 12,657.90.

All three major averages made weekly gains. The S&P 500 rose 1.65%, and the Nasdaq gained 3.04%. It was the best weekly performance since March for both indexes. The Dow added 0.38%.

Friday’s late slide saw the ASX 200 share price index dip as well and the local market is now looking at a small loss this morning (11 points, which is neither here nor there).

That was after the index ended Friday up 42.7 points, or 0.6%, at 7,279.5. For the week, the ASX200 gained 22.8 points, or 0.3% per cent, for its second straight week of gains.

The Aussie dollar ended the week at 66.49 US cents in New York, which wasn’t much different to its local close. US Treasuries closed slightly lower – the 10-year bond yield fell to 3.68% as did the yield on 2-year bonds.

“Wall Street thought we were going to see bill text over the weekend or early on Monday, with a potential vote in the middle of the week,” said OANDA senior market analyst Edward Moya.

“That seems less likely now and could raise the risk that we won’t get an agreement before June 1st, the so-called X-date.”

Keeping in mind the divisiveness of US politics, the debt ceiling issue will get more heated again, Moya told Kitco News.

“You are going to start to see a bit more difficulty in negotiations. Gold will be in the wait-and-see mode to figure out which part of the economy will break,” he said Friday. “The consumer is clearly weakening. A lot of the data still supports a recession.”

Friday’s losses were kept in check, however, after Federal Reserve Chairman Jerome Powell said interest rates may not have to rise as much as expected to quell inflation.

Federal Reserve Chair Jerome Powell said Friday that interest rates may not have to rise as much as previously thought in part due to stresses seen in the banking sector.

“The financial stability tools helped to calm conditions in the banking sector. Developments there, on the other hand, are contributing to tighter credit conditions and are likely to weigh on economic growth, hiring and inflation,” he said as part of a panel on monetary policy.

“So as a result, our policy rate may not as it would have otherwise to achieve our goals,” he added. “Of course, the extent of that is highly uncertain.”


Meanwhile after its busy annual meeting on Tuesday, Tesla ended the week with yet another round of targeted cost cuts at the weekend.

The Tesla website showed discounts of more than $US1,300 on some Model 3 cars in the US after bigger discounts in Europe.

The price cuts came a couple of weeks after another round of price rises – the second in a month.

Tesla CEO Elon Musk told shareholders at Tuesday’s annual meeting that the EV maker is going to try advertising for the first time, in a move seen by the market to drum up demand. Musk also warned Tesla was not immune to the global economy, which he said will be difficult for the next 12 months.

Reuters reported that Tesla is resorting to the traditional carmaker’s tactic of offering incentives to clear unsold vehicles at a time when it faces economic headwinds and rising competition,

The news came after the market closed for the week which saw the shares rise a strong 7.4% by Friday.


As we reported at the weekend (see story), the boom on the Japanese stockmarket continues.

Japan’s stock benchmark ended Friday at the highest since August 1990, (in the country’s “bubble” era), driven by a combination of positive factors from strong earnings to an economy showing signs of revving up, rising inflation and wages and optimism over a US debt ceiling deal.

The benchmark Nikkei index jumped as high as 30,924.57 before closing the day up 0.77% at 30,808.35, for the seventh straight winning session.

The broader Topix, which had reached the post-bubble milestone on Tuesday, extended its climb to as high as 2,171.37, before ending with a more modest 0.18% gain to 2,161.69.

Japan’s stock rally has been powered by an overall very strong earnings season, a weaker yen underpinned by views that the Bank of Japan will keep stimulus for longer and an economy that is starting to show signs of a post-COVID consumption revival.

Foreign buying thanks to increased investment by Warren Buffett and a push for better corporate governance by the Tokyo Stock Exchange have provided additional impetus.

The Nikkei’s final push to a 33-year peak drew momentum from rising optimism that U.S. lawmakers can reach a debt ceiling deal and avert a catastrophic default.

“Long-term fundamentals might have begun changing in Japan, and foreign investors do not want to miss this opportunity,” said Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui DS Asset Management.

“As long as any U.S. slowdown is mild, the current level of Japanese equities in not overvalued. There is still room for a further rise” Reuters reported at the weekend.