Market Overview
Global Stock Decline
- Stocks are sliding globally, with US shares poised to follow, as bond yields spike due to fading rate cut expectations.
- US Treasuries fell after weak debt auctions and remarks from a Federal Reserve speaker fueled expectations that interest rates will remain higher for longer.
- European bonds followed suit as German inflation data came in lower than expected.
- US equity futures are set to open lower, with American Airlines extending post-market losses after it cut its profit forecast.
- European shares also fell, with airlines among the laggards.
Oil Market Tensions
- Oil is extending gains as another attack in the Red Sea added to heightened geopolitical tensions in the Middle East.
- ConocoPhillips is in advanced talks to acquire smaller rival Marathon Oil. The all-stock proposal values Marathon at slightly more than its market capitalization of about $15 billion, giving ConocoPhillips control of assets in Texas, Oklahoma, North Dakota, and the Permian Basin. Marathon shares advanced in pre-market trading.
Company News
BHP's Bidding Saga
- BHP’s bidding saga for miner Anglo American seems likely to be over for now.
Hedge Fund Exposure
- Hedge fund exposure to US technology behemoths hit a record high following Nvidia’s earnings report last week, according to Goldman Sachs’s prime brokerage.
- The so-called Magnificent Seven companies — Nvidia, Apple, Amazon, Meta Platforms, Alphabet, Tesla, and Microsoft — now account for about 20.7% of hedge funds’ total net exposure to US single stocks.
Upcoming Earnings Reports
- Companies due to report on Wednesday include Salesforce, Agilent Technologies, HP Inc., as well as Bank of Montreal and National Bank of Canada.
Economic Data
Key Economic Releases
- Economic data releases expected today include MBA Mortgage Applications, May’s Richmond Manufacturing Survey, and the Fed’s Beige Book.
Notable Events
FTSE 100 Performance
- FTSE 100 drops for the sixth consecutive day as its dismal run continues.
Geopolitical Developments
- The White House stated that Israel’s Rafah strike does not cross a red line.
- Trump prosecutor urges conviction over hush-money plot and cover-up.
Currency Movements
- The pound rose to its strongest level against the euro in almost two years.
International Affairs
- Expulsions of Chinese students spread confusion from Yale to UVA.
- South Africa votes in the closest election in the post-apartheid era.
- Japan debates restarting the world’s largest nuclear plant, which has been idle since the 2011 Tsunami.
Summary
Global markets are facing significant volatility as rising bond yields and geopolitical tensions exert downward pressure on stocks. In the US, equity futures are set to open lower, influenced by economic data and Federal Reserve statements. Oil prices continue to rise due to Middle Eastern geopolitical unrest, while significant corporate developments and hedge fund activities are impacting market dynamics. Key economic data releases and earnings reports are anticipated to provide further market direction.
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