European Markets Climb as UK Heads to Polls; Asia-Pacific Indices Hit Record Highs

Vida Markets

Friday 5th July 2024, 11:47 am Time to read: 6 mins.

Despite a busy political backdrop with the UK general election, European markets managed to close higher for the second consecutive session on Thursday. The regional Stoxx 600 index saw a 0.6% rise, driven by a strong performance in the banking sector. Meanwhile, Asian markets experienced significant gains, with Japan and Taiwan's stock benchmarks reaching all-time

Despite a busy political backdrop with the UK general election, European markets managed to close higher for the second consecutive session on Thursday. The regional Stoxx 600 index saw a 0.6% rise, driven by a strong performance in the banking sector. Meanwhile, Asian markets experienced significant gains, with Japan and Taiwan's stock benchmarks reaching all-time highs. This positive momentum in the global markets comes amid a mix of economic data and restrained optimism from investors, reflecting a complex but resilient economic landscape. The US Stock Exchange was closed on Thursday for Independence Day.

Key Takeaways:

European Stocks Close Higher Ahead of UK Election: The Stoxx 600 index rose 0.6%, with the banking sector leading the gains at 1.3%. The FTSE 100 Index increased by 70.14 points, or 0.86%, as the UK headed to the polls. France's CAC 40 Index climbed 63 points, or 0.82%, marking a second session of gains. Despite this, the Construction PMI in France fell to a three-month low of 41 in June from 43.5 in May. Eurofins Scientific SE (3.10%), Societe Generale (2.50%), and Credit Agricole (2.26%) led the gains, while Cap Gemini (0.31%), Unibail Rodamco (0.31%), and Pernod Ricard (0.29%) were the top losers.
Japan and Taiwan Indices Reach New Highs; Mixed Results in Hong Kong and Australia: The Topix index in Japan rose 0.92% to 2,898.47, surpassing its previous all-time high. The Nikkei 225 increased by 0.82% to 40,913.65, hitting a new record. Taiwan's Weighted Index also set a fresh high, closing up 1.51% at 23,522.53, driven by gains in chip stocks like Hon Hai Precision Industry (up 6%) and Taiwan Semiconductor Manufacturing Company (up 2.66%). Hong Kong's Hang Seng index rose 0.21%, while the CSI 300 in Mainland China remained flat at 3,445.81. Australia's S&P/ASX 200 gained 1.19% to 7,831.9, despite a narrower trade surplus of AU$5.77 billion in May, down from AU$6.03 billion in April.
Bitcoin Slides to Two-Month Low: Bitcoin’s price dropped to around $57,000 on Thursday, hitting a two-month low after the US Federal Reserve released minutes from its June meeting indicating the central bank isn’t yet ready to cut interest rates. The cryptocurrency fell around 5% in 24 hours.
Canadian Services Sector Contracts: The S&P Global Canada Services PMI dropped to 47.1 in June from 51.1 in May, indicating a contraction in the services sector for the first time since March. The decline in new business was a significant factor, with the new business index falling to 47.9 from 51.8.
Oil Prices Hit Highest Levels Since April: Brent crude futures climbed to $87.55 a barrel, marking the highest level since April, following a larger-than-expected draw in US crude inventories. The US Energy Information Administration (EIA) reported a 12.2 million barrel draw in inventories, significantly higher than the expected 680,000 barrel decrease. Similarly, West Texas Intermediate (WTI) crude futures also saw an increase, rising 28 cents to $84.15 a barrel.
UK Construction Growth Slows and Employers Scale Back Expected Wage Growth: The S&P Global UK Construction Purchasing Managers' Index fell to 52.2 in June from 54.7 in May, indicating a slowdown in construction activity. Additionally, British employers anticipate slower wage bill growth over the next 12 months, with expected year-ahead wage growth falling by 0.3 percentage points to 4.2%, according to the Bank of England's Decision Maker Panel survey. This data supports the Bank's view that it may soon be able to cut interest rates.

FX Today:

GBP/USD Drifts Higher Ahead of UK Election Results: The GBP/USD pair rose to 1.2760, extending into a third day of gains as the Greenback broadly receded. The pair saw a technical rejection from a supply zone priced above 1.2800 but managed to arrest near-term declines just north of the 200-day Exponential Moving Average (EMA) at 1.2610. Traders are closely watching the election results, with GBP/USD showing resilience in maintaining its upward momentum.
EUR/USD Rises as US Labour Market Strength Shifts: The EUR/USD pair jumped to the round-level resistance, climbing above the 20-day and 50-day Exponential Moving Averages (EMAs) at 1.0750 and 1.0770, respectively. This suggests a steady near-term outlook. The pair's long-term appeal also improved as it surpassed the 200-day EMA, which trades around 1.0800, indicating a stronger position amidst volatile market conditions.
USD/CAD Struggles to Break Past 1.3600: USD/CAD faced resistance at the 1.3600 level, retreating to test support around 1.3550. The pair is caught in a consolidation phase, with the 200-day EMA at 1.3588 posing a significant barrier. A clean downside break of 1.3600 sets the pair up for a renewed challenge, highlighting the delicate balance of forces acting on USD/CAD and the potential for reversion to previous ranges if momentum wanes.
AUD/USD Holds Gains Despite Lower-Than-Expected Trade Surplus: The AUD/USD pair maintained its upside bias, revisiting the area of three-month highs past the 0.6700 mark. Indicators such as the Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) are in positive territory. The pair’s resistance targets are at 0.6730 and 0.6750, while potential support levels include 0.6670, 0.6650, and 0.6630, reflecting a robust outlook despite mixed economic signals.
Gold Prices Consolidate Amid Market Uncertainty: Gold traded at $2,356, up 0.15%, after hitting a two-week high of $2,365 on Wednesday. The overall bullish trend remains intact, supported by a bullish Relative Strength Index (RSI). If the gold price breaks above the pattern's neckline, it could rise to $2,400, potentially leading to further gains towards the year-to-date high of $2,450. Conversely, if sellers drive the spot price below $2,350, further declines could target the $2,300 level, with the next demand zone at $2,277, followed by of $2,222.
Market Movers:

SoftBank (9984.T-JP) Hits Record High: SoftBank shares soared to their highest level in 24 years, closing at a record 11,190.00 Japanese yen, up 4.53%. This marks a significant milestone for the company, eclipsing the previous intraday high of 11,000 yen reached on February 15, 2000.
Continental AG (CON-FF) Jumps on Upgrade: Shares of German manufacturer Continental AG surged 9.5%, leading the index after Citi analysts upgraded the stock to a “buy” rating. The upgrade was driven by positive outlooks for its automotive division in the second quarter.
Hellofresh (HFG0-FF) Climbs on Analyst Revision: Meal-kit firm Hellofresh saw its shares climb 10%, bringing its weekly gains to nearly 33%. JP Morgan removed the stock from its Negative Catalyst Watch, citing stabilising meal-kit trends in North America.
Merck & Co (MRK) Gains on Licensing Deal: Merck & Co's shares rose more than 3%, leading gainers in the Dow Jones Industrials, after converting its co-exclusive license for the prostate cancer drug candidate Opevesostat with Orion into an exclusive global license.
Spirit AeroSystems (SPR) Rises on Acquisition News: Spirit AeroSystems shares closed up more than 3% following Boeing’s agreement to buy the company for approximately $4.7 billion, or $37.25 per share, in an all-stock deal.
Teleflex (TFX) Upgraded, Shares Increase: Teleflex shares increased by more than 2% after Piper Sandler upgraded the stock to overweight from neutral, setting a new price target of $245.
Birkenstock Holding Plc (BIRK) Boosted by Upgrade: Birkenstock shares closed up more than 2% after UBS upgraded the stock to buy from neutral, with a new price target of $65.
Cruise Line Operators Hit by Hurricane Fears: Norwegian Cruise Line Holdings (NCLH) shares dropped more than 5%, leading the S&P 500's losers, as Hurricane Beryl threatened the Caribbean. Carnival (CCL) and Royal Caribbean Cruises (RCL) also fell, down more than 5% and 1%, respectively.
Homebuilders Retreat on Rising Mortgage Rates: PulteGroup (PHM) shares fell more than 3%, while Toll Brothers (TOL), DR Horton (DHI), and Lennar (LEN) each dropped more than 2%. The decline followed a rise in the 10-year T-note yield, which is expected to push mortgage rates higher, negatively impacting housing demand.
O’Reilly Automotive (ORLY) Declines on Lower Sales Estimate: O’Reilly Automotive shares fell more than 3% after Barclays cut its Q2 comparable sales estimate to 2%, below the consensus of 3.7%, citing ongoing demand headwinds. AutoZone (AZO) also saw a drop of more than 4% on the news.
Walgreens Boots Alliance (WBA) Drops on Price Target Cut: Walgreens shares declined by more than 4% after JPMorgan Chase lowered its price target for the stock from $30 to $20.
As the trading week unfolds, the resilience of global markets is evident with European and Asian indices reaching new highs and major stocks showing notable movements. Despite mixed economic signals and political uncertainties, investor sentiment remains slightly optimistic. The UK's general election, coupled with significant corporate developments and central bank policies, continues to influence market dynamics. From record-setting performances in Japan and Taiwan to the cautious stance of the Federal Reserve, these events highlight the complex yet adaptive nature of global financial markets. Investors are closely monitoring these developments, balancing optimism with carefulness as they navigate the evolving economic landscape.


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