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31.05.2023 03:14 PM
US premarket on May 31: US stock market dips from yearly highs

US stock index futures are gradually sliding after hitting yearly peaks yesterday. Similar pressure is seen in the European market as China's economic woes are impacting investor sentiment. The S&P 500 and Nasdaq 100 futures plunged by 0.2% and 0.3% respectively, following the recent Wall Street rally sparked by AI hype. Treasury yields fell while the dollar rose for the first time in four days.

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Weak Chinese statistics and poor manufacturing data have heightened fears about the global economic growth outlook, particularly when central banks worldwide continue to adhere to tight monetary policy with no plans to deviate. Rumors about the Federal Reserve being forced to raise rates during its June meeting also discourage investors from purchasing more risk assets.

New data from Europe led traders to revise their rate hike expectations from the European Central Bank. However, this also led to increased fears about the region's prospects. The euro fell to a two-month low against the US dollar after inflation in France and Germany dropped more than expected, reaching a year-long low. This partly prompted traders to dial back expectations for an imminent ECB rate hike. European bonds rose, with Germany's 10-year bond yield dropping by around nine basis points. Notably, slowing inflation may boost consumer demand, aiding the European economy in avoiding a recession scenario predicted early next year.

The Asian stock market hit a two-month low after China reported the lowest PMI figures since last December. Hong Kong's Hang Seng Index dropped by more than 2%, hinting at a looming bear market. The yuan hit its weakest level against the US dollar in six months. Oil prices kept falling, while copper extended almost a year's worth of monthly losses. Iron ore fell below $100 per ton.

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As for the S&P 500 index, demand for the index has slightly decreased but buyers still have a chance to establish an uptrend. Bulls should drag the price to $4,200, which could spark a surge to $4,229. Bulls also need to control $4,290, which would strengthen the bull market. If the trading instrument declines due to weak US economic data and hawkish comments from Federal Reserve representatives, bulls need to protect the area of $4,175 and $4,143. Breaking through this level, the trading instrument may return to $4,114 and drop to $4,091.

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