ASX 200 to fall + S&P 500 lower as US debt ceiling clears first hurdle

S&P 500 SESSION CHART

MARKETS

• S&P 500 lower but off worst levels of -0.94%
• Risk-off session weighed by higher-for-longer Fedspeak, pickup in grown concerns and a pullback for tech stocks
• WTI crude marked its largest monthly decline since November 2021, down 11.8%
• FOMO sees surge in tech stocks with Nasdaq up 31% since December (Bloomberg)
• Fed Governor John says a pause doesn’t mean rates are at the peak (Fed)
• Cleveland Fed President Mester sees no compelling case to wait before next rate hike (FT)

STOCKS

• Nvidia market cap pushes through US$1tn (Bloomberg)
• Foxconn forecasts its AI server business to double in 2H23 (FT)
• Goldman Sachs pursuing fresh round of job cuts (FT)
• Intel sees second-quarter revenue at upper end of outlook (Reuters)
• Salesforce forecasts current-quarter revenue above estimates (Reuters)
• AI stocks tumble after short-seller attack on C3.ai (Reuters)
• HP Enterprises shares fall as dull forecast fuels fear of slowing demand (Reuters)

ECONOMY

• House Rules Committee votes 7-6 to advance debt ceiling bill (Bloomberg)
• Economists see GOP big spending cuts to have little impact on economy (Bloomberg)
• US labour market remains resilient as job openings climb, layoffs drop (Reuters)
• China factory activity falls faster than expected as demand slumps (Reuters)
• French inflation eases more than expected, hits one-year low (Bloomberg)
• German import prices lowest since 2020 (DW)
• Deutsche Bank warns of wave of corporate debt defaults in US and Europe (Reuters)
• UK business confidence flags first drop in 3 months as inflation persists (Reuters)
• Australian inflation accelerates, pressures RBA to continue tightening (Reuters)
  
  

Deeper Dive

China's disappointing post-Covid recovery

China's manufacturing PMI unexpectedly fell to 48.8 in May from 49.2 in the previous month, which was well-below consensus expectations of a rise to 49.4.

More importantly, China's steel industry contracted at a faster pace in May, with PMI falling 9.8 points to 35.2. This marks a third consecutive month of contraction. The sub-index for new orders tumbled 12.5 points to 27.4 amid sluggish activity from the real estate sector and slower-than-expected local government bond issuances.

“The Chinese economy could be at the risk of a double dip. Insufficient demand is the major concern now .. Goods deflation is weighing on profitability .. the Chinese economy could be on the verge of a self-fulfilling confidence trap .. decisive policy actions are needed," Citi said in a note on Wednesday.

Semiconductor stocks are very cyclical

An interesting perspective about semiconductors and the AI hype train from Trahan Macro Research:

• Nvidia accounts for over a third of the semiconductor market cap
• Nvidia's revenues are cyclical
• Semi stocks are driven by macro forces
• Monetary tightening points to much lower global PMIs ahead