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What’s happening: US stocks closed mostly higher on Monday, with the Dow Jones index adding more than 100 points.
What happened: Investor sentiment was not dampened by Moody’s downgrading its US sovereign credit rating.
Most sectors closed the session in the positive zone, with the S&P 500 recording gains for the sixth straight session.
Why it matters: Moody’s slashed the US federal government’s perfect sovereign credit rating from ‘Aaa’ to ‘Aa1’, due to the government’s outstanding debt and interest worth $36 trillion.
Market sentiment is being supported by an easing in the US-China trade war, with the countries announcing plans to temporarily lower tariffs for 90 days. The US agreed to slash tariffs to 30% from 145% on imports from China, while Beijing said it would lower duties to 10% from 125% on goods imported from the US.
US benchmark 10-year Treasury yields rose on Monday amid concerns that the tax bill will result in a higher-than-expected debt load. US President Donald Trump’s tax-cut bill was approved by a key congressional committee on Sunday.
On the corporate front, TXNM Energy’s stock gained around 7% on Monday after the company agreed to be acquired by Blackstone’s infrastructure unit in a deal worth $11.5 billion. Shares of Novavax surged about 15% after the US FDA approved its covid-19 vaccine.
The three major US stock indices started the session under pressure but rebounded later to close higher. Seven of the major sectors on the S&P closed the session higher, with healthcare, consumer staples and industrials among the top performers on Monday. However, energy and consumer discretionary stocks bucked the overall market trend, closing in the red.
The Dow Jones index jumped 137.33 points, or 0.32%, to close at 42,792.07, while the S&P 500 rose 0.09% to settle at 5,963.60. The Nasdaq 100 added 0.09% to reach 21,447.05 on Monday.
What to watch: With no major economic data scheduled for today, investors await the release of the Chicago Fed National Activity Index, initial jobless claims and S&P Global composite PMI on Thursday. The Chicago Fed National Activity Index, which fell to -0.03 in March from 0.24 in the previous month, is expected to decline further to -0.2 in April.
Analysts expect initial jobless claims in the US to increase to 230,000 in the latest week, from 229,000 in the week ending May 10. The S&P Global US composite PMI is projected to decline to 50.4 in May, from a reading of 50.6 in April.
Context: The CAD/USD forex pair edged lower this morning amid dovish expectations from the Bank of Canada.
Details: Moody’s downgrade of US sovereign rating, along with rising concerns that the Federal Reserve will soon start lowering interest rates, eroded the appeal for the US dollar.
The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.1% to 100.34 this morning. However, weakness in the US dollar failed to provide support to the CAD/USD forex pair.
Sentiment for the loonie remained subdued with the Bank of Canada expected to announce a rate cut in June.
The Canadian dollar fell despite strength in the price of crude oil, one of Canada’s major exports. WTI crude oil prices gained 0.2% to trade at $62.82 a barrel this morning.
The CAD/USD pair fell around 0.1% to 1.3963 this morning.
What to watch: Investors await the release of economic data on Canada’s inflation rate (1630 UAE Time) today. The annual inflation rate in Canada, which declined to 2.3% in March from 2.6% in the previous month, is expected to ease further to 1.6% in April. Analysts expect the Consumer Price Index to decline 0.2% in April, following a 0.3% increase in March.
Other Markets: European indices closed mostly higher on Monday, with FTSE 100, DAX 40 and STOXX Europe 600 Index up by 0.17%, 0.70% and 0.13%, respectively, and the CAC 40 down by 0.04%.
After a two-hour call with US President Donald Trump, Russian President Vladimir Putin said he is ready to begin talks with Ukraine to end the ongoing war. The news sent the safe-haven US dollar index lower in forex trading this morning.
The People’s Bank of China slashed its key lending rates to fresh lows, exerting pressure on the CNY/USD forex pair.
Colombia’s trade deficit widened to $1.205 billion in March, from $0.927 billion in the year-ago period, sending the COP/USD pair slightly lower in forex trading this morning.
Chile’s economy grew by 2.3% year-over-year in the first quarter, slowing from a 4% expansion in the previous quarter, which exerted pressure on the CLP/USD forex pair.
Brazil’s IBC-Br Index of Economic Activity increased by 0.8% in March, following a 0.4% rise in the previous month. The latest reading also topped market estimates of a 0.5% gain, sending the BRL/USD pair higher in forex trading this morning.
Eurozone’s current account (1200 UAE Time), construction output (1300 UAE Time), labour cost index (1300 UAE Time) and consumer confidence (1800 UAE Time), Italy’s construction output (1200 UAE Time) and current account (1300 UAE Time), India’s infrastructure output (1530 UAE Time), US Redbook index (1655 UAE Time), Fed Barkin speech (1700 UAE Time), Fed Bostic speech (1700 UAE Time), Fed Collins speech (1730 UAE Time) and Fed Musalem speech (2100 UAE Time), as well as Argentina’s balance of trade (2300 UAE Time).
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