S&P500 jumps as investors believe the Fed will pause rate hikes

The S&P 500 jumped to its highest level in 13 months on Monday as traders hoped the Federal Reserve will skip hiking rates when the central bank decides on policy Wednesday.

Traders have priced in a roughly 72 per cent chance that there will be no hike, potentially bringing to an end the 10 consecutive rate hikes since starting this latest policy-tightening cycle in March 2022.

Tuesday’s inflation data could help reinforce the case that inflation is subsiding, as economists expect the consumer price index to show inflation dropping to a 4 per cent annual rate in May. That’s down from 4.9 per cent in the prior month.

Overnight, the S&P 500 added 0.93 per cent to close at 4,338.93,the benchmark surpassed its high from last August and reached the best levels since late-April 2022. The Nasdaq Composite popped 1.53 per cent to finish the day at 13,461.92, also reaching the highest level since April 2022. The Dow Jones Industrial Average climbed 189.55 points, or 0.56 per cent, to close at 34,066.33.

This added to small gains made over the June long weekend.

Oracle shares climbed as much as 5 per cent in extended trading on Monday after the software vendor announced fiscal fourth-quarter results that exceeded Wall Street’s expectations. Excluding the after-hours move, Oracle shares have climbed almost 43 per cent so far this year, while the S&P 500 index is up around 13 per cent over the same period. The stock rose 6 per cent in regular trading, its best day in a year

Apple shares rose more than 1.5 per cent on Monday to close at an all-time-high – The milestone comes a week after Apple’s biggest product launch of the year. Last Monday, the company kicked off its developers conference, and unveiled the Vision Pro headset, its first entirely new product line since 2014.

Novartis has agreed to acquire Chinook Therapeutics for $3.5 billion, aiming to boost its late-stage drug development lineup and advance the race for a rare kidney disease treatment, with Chinook's shareholders receiving $3.2 billion in cash and a contingent value right of up to $300 million.

In Europe, UBS has closed its takeover of Credit Suisse. The combination of Switzerland’s two biggest banks will create a financial giant with $1.6 trillion in assets and a formidable presence in wealth management. To prevent more of the kinds of scandals that plagued Credit Suisse, UBS has reportedly imposed restrictions on its former rival’s bankers, including a ban on doing business with countries like Libya and Venezuela.

In commodity news, The rise in EV sales and lithium shortages are driving carmakers to consider sodium-based batteries, potentially leading to a decline in lithium demand, while South Korea's stock market approaches bull territory due to foreign investment in AI stocks and local investors focusing on EV battery-related shares.

Overall, almost all US sectors closed higher overnight. Tech was the best performer, whilst Energy was the worst.

Futures

The SPI futures are pointing to a 0.4 per cent gain.

Currency

One Australian dollar at 7:10 AM was buying 67.52 US cents.

Commodities

Iron ore futures are pointing to a 0.6 per cent fall.

Gold lost 0.29 per cent. Silver fell 1.09 per cent. Copper dropped 0.98 and oil plunged 4.13 per cent.

Figures around the globe

Across the Atlantic, European markets closed higher. London’s FTSE added 0.11 per cent, Frankfurt gained 0.93 per cent while Paris closed 0.52 per cent higher.

In Asian markets, Tokyo’s Nikkei added 0.52 per cent, Hong Kong’s Hang Seng was up 0.07 per cent while China’s Shanghai Composite closed 0.08 per cent lower.

On Friday, the Australian sharemarket closed 0.32 per cent higher at 7122.51.

Sources: Bloomberg, FactSet, IRESS, TradingView, UBS, Bourse Data, Trading Economics, CoinMarketCap.

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