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At the close of trading yesterday, the Dow Jones Index (US30) gained 0.03%, while the S&P 500 (US500) gained 0.23%. The Nasdaq Technology Index (US100) closed Tuesday positive by 0.36%. Recent economic data and dovish comments from Fed officials have increased the likelihood that the Fed will keep interest rates on hold at its June 13-14 meeting. According to CMEGroup's Fedwatch tool, traders estimate an 80% chance that the central bank will hold interest rates in the 5-5.25% range. Nevertheless, there is more than a 50% chance of another 25 basis point rate hike in July. The CBOE Volatility Index reached its lowest level since July 2021. Typically, when the volatility index falls to lows, the stock market should expect a corrective move.

Apple Inc (AAPL) introduced an augmented reality headset called Vision Pro. But the stock has reacted negatively, as analysts are not convinced that the $3499 price tag will drive strong sales, especially at a time of declining economic activity. Advanced Micro Devices (AMD) shares rose more than 4% after Piper Sandler raised its target share price to $150

Equity markets in Europe were mostly up yesterday. Germany's DAX (DE30) gained 0.18%, France's CAC 40 (FR40) gained 0.11% on Tuesday, Spain's IBEX 35 (ES35) added 0.23%, Britain's FTSE 100 (UK100) closed up 0.37%. Investors are concerned about the slowdown in global growth and future central bank policy decisions. Factory Orders in Germany unexpectedly fell by 0.4% in April (Actual: -0.4% Forecast: -2.2% Previous: -10.9%), illustrating the worsening outlook for Europe's largest economy. Markets increasingly expect the Federal Reserve to pause rate hikes next week, but the European Central Bank does not seem likely to follow anytime soon as core inflation remains high. President Christine Lagarde on Monday reinforced expectations of further rate hikes.

Yesterday Russian troops blew up the Kakhovka hydroelectric power plant in southern Ukraine. Ukrainian President Vladimir Zelensky called a meeting of the National Security and Defense Council. At the moment, there is an evacuation of the population in the territories controlled by Ukraine. About 80 settlements are in the flooded area, and the nearest villages have already gone underwater. On the environmental and economic consequences, the destruction of the Kakhovka hydroelectric power station can be equated to the consequences of the use of tactical nuclear weapons of 5-10 kilotons. The explosion of the Kakhovskaya HPP may have negative consequences for the nuclear power plant in Enerhodar if the water level in the reservoir falls below the critical level. It would also have a negative impact on the eco flora of the Black Sea, on the region's crop fields, and on the availability of drinking water in some cities in the region.

A 1 million-barrel-a-day cut in Saudi Arabia's oil production, which would reduce output by 20% in July, would not by itself drive the price of a barrel to $80 to $90, Citigroup analysts said.

Asian markets traded yesterday without a single dynamic. Japan's Nikkei 225 (JP225) gained 0.90% over the day, China's FTSE China A50 (CHA50) was down by 0.26%, Hong Kong's Hang Seng (HK50) ended the day down by 0.05%, India's NIFTY 50 (IND50) gained 0.03%, and Australia's S&P/ASX 200 (AU200) ended Tuesday negative by 1.20%.

Wednesday's decline continued as weaker-than-expected economic reports from China and Australia worsened investor sentiment in the region. China's trade surplus reached a yearly low in May on the back of shrinking exports. A slowdown in economic growth in Europe and the US is expected to lead to a decline in Chinese exports this year as both regions, which are major consumers of Chinese goods, struggle with high inflation and interest rates. Data from the Australian Bureau of Statistics showed Wednesday that real gross domestic product (GDP) rose by 0.2% in the first quarter, up from 0.5%. Annual growth was 2.3%, which also missed forecasts for growth of 2.4%.

Goldman Sachs economists note that further interest rate hikes by the US Federal Reserve will further weaken the Japanese yen. The Bank of Japan maintains its extremely dovish stance on negative interest rates. The rate differential between the US and Japanese central banks will persist. The Bank of Japan's next monetary policy meeting is scheduled for June 15 and 16.

• S&P 500 (F) (US500) 4,283.75 +9.96 (+0.23%)
• Dow Jones (US30)33,573.34 +10.48 (+0.031%)
• DAX (DE40) 15,992.44 +28.55 (+0.18%)
• FTSE 100 (UK100) 7,628.10 +28.11 (+0.37%)
• USD Index 104.15 +0.14 (+0.14%)
   

Important events for today:

• Australia RBA Governor Lowe Speaks at 02:20 (GMT+3);
• Australia GDP (q/q) at 04:30 (GMT+3);
• China Trade Balance (m/m) at 06:00 (GMT+3);
• Switzerland Unemployment Rate (m/m) at 08:45 (GMT+3);
• German Industrial Production (m/m) at 09:00 (GMT+3);
• US Trade Balance (m/m) at 15:30 (GMT+3);
• Canada Trade Balance (m/m) at 15:30 (GMT+3);
• Canada BoC Interest Rate Decision at 17:00 (GMT+3);
• Canada BoC Rate Statement at 17:00 (GMT+3);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

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