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Market turbulence ahead of Reserve Bank's rate meeting

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2024-06-17

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Heading into the Reserve Bank’s rate meeting this week, the ASX will not be in a confident mood.

The ASX 200 Index will start with another fall this morning after the overnight SPI futures platform locked in a 17-point drop at the close on Saturday morning, Sydney time.

That was after the index fell 25.4 points, or 0.3%, on Friday to end at 7,724.3, down 1.7% for the week.

Wall Street didn’t help, wandering to a weak finish on Friday. However, led by the three trillionaires - Apple, Microsoft, and Nvidia - the Nasdaq managed a solid weekly performance, while the key S&P 500 also enjoyed a nice rise.

The Nasdaq, in fact, had its fifth record close in a row on Friday.

Hopes for a continued cooling of inflation boosted markets from mid-week, even though the Fed made it clear rates would not fall any time soon.

Still, the S&P 500 and Nasdaq Composite ended the week higher by about 1.6% and 3.2%, respectively, but the Dow shed around half a percent as the tech surge failed to lift it, even though Microsoft and Apple are among its 30 members.

Apple shares fell on Friday but ended the week up 7.7% at $3.26 trillion; Nvidia shares rose more than 9% over the week, lifting its value to $3.24 trillion, and Microsoft edged out Apple to close the week up 3.3% at $3.29 trillion.

The total valuation of the companies at Friday’s close was just under $10 trillion - the highest end-of-week combined value for three companies ever.

"The reality is that, even in these bull markets, there are going to be days where you take a pause and where people take some gains. We've had such a strong run, especially coming off of soft PPIs and soft CPI… I think it's a pretty, pretty natural place to take a pause after a pretty aggressive rally," Ross Mayfield, an investment strategy analyst at Baird, told CNBC.

European stocks tumbled on Friday, rounding off a choppy week after far-right political parties made election gains and French President Macron called a shock parliamentary election.

The STOXX 600 index fell all week to be down nearly 1% on Friday and 2.4% for the week.

The French market led the way, slumping 2.7% on Friday and more than 6% for the week, as investors suddenly realized that their previously favorable business climate (one they had criticized under Macron and his government) is in danger from a resurgent extreme right-wing.

Investors and business leaders who have ignored the rise of the right and unrest among farmers and industrial workers now face the possibility of a win by the populist, far-right National Rally. The country’s six-month bond yields rose all week, driving the yield up to a high of 3.4% early Friday before they closed at 2.98%.

The yield on 10-year bonds jumped over 3% to end at 3.11%, well above the 2.36% yield for the German bunds, the European market leader.

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