US stocks market extended its rally as favorable inflation and growth data persisted

Market Summary

Last week, the US and EU markets closed higher following the Fed’s decision to pause the rate hike. The Asian markets also closed higher.

The US stocks market extended its rally as favourable inflation and growth signals persisted, with the S&P 500 Index achieving its longest streak of daily gains since November 2021 and its best weekly performance since March. Consumer inflation reached its lowest level since March 2021 at 4.0%, down from the prior month's 4.9%.

In Europe, the STOXX Europe 600 Index rallied 1.47% following Fed’s rate hike pause and China’s stimulus measures. Bond yield climbed above 2.5% following the European Central Bank’s hawkish comments about further hike in July amidst persistent inflation.

In Japan, stock markets gained 4.5%. This comes after new data shows better-than-expected export. The yen weakened against US dollars to its lowest in seven months as a result of continued divergence in the monetary policies.

In China, equities also gained as the People’s Bank of China cut its seven-day reverse repurchase rates and the lending rates to assist the country’s economic recovery.

Major News

The Federal Reserve signalled its support for two more interest rate rises this year, including one potentially in July, despite holding rates steady at its recent meeting.

The European Central Bank (ECB) has raised interest rates by a quarter-point to 3.5% and indicated further increases in July, citing persistent inflation concerns. The ECB's decision comes as it raised its inflation forecast and lowered its growth projection for the next three years.

China's central bank has cut a key lending rate by 10 basis points from 2.75% to 2.65% to reduce borrowing costs and stimulate the economy. This move comes as data reveals a slowdown in property sales, retail sales, and industrial production.

What Caught Our Attention

Ishi Sunak, the UK Prime Minister, envisions Britain as an AI superpower, believing that AI technology can drive economic growth and improve public services. The government has expressed its commitment to AI development, with announcements and investments in the field. However, significant challenges hinder the country's path to success in AI.

The foremost obstacle is the lack of computing power and access to clean datasets necessary for training AI models. None of the major cloud-computing companies have established advanced GPU clusters in Britain, making it difficult to scale AI operations. Renting compute abroad is an option, but sensitive data and the need for local expertise pose additional challenges. The absence of hyperscale GPU clusters in Britain affects companies supplying AI-related products and services. To overcome the hurdles, the government must advocate for the establishment of GPU clusters by major cloud-computing companies and address challenges related to data quality, talent retention, and effective AI regulation

Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia