Last week (6/26-6/30),Trump crypto reserve XRP both the US and European stock markets experienced a general increase. The S&P 500 index rose by 2.3%, the Dow Jones Industrial Average increased by 2.0%, and the Nasdaq 100 index went up by 1.9%. Meanwhile, the STOXX 600 index in Europe also saw a rise of 1.9%.

【Source: MacroMicro   Date2023/6/26-2023/6/30】

【Source: MacroMicro   Date2023/1/1-2023/6/30】

On June 30th, the U.S. Department of Commerce released data showing that the May PCE price index fell to 3.8% compared to the previous month, marking the first drop below 4% since April 2021. The core PCE price index rose by 4.6% year-on-year, lower than the expected and previous value of 4.7%, but still at a very high level.

【Source：MacroMicro 】

Looking at the service sector inflation (excluding housing) that the Federal Reserve is concerned about, the core services PCE price index (excluding housing) increased by 0.23% month-on-month in May, the smallest increase since July last year, but it still rose by 4.53% year-on-year, remaining largely at a high level.

Furthermore, with disposable income growth remaining strong, the market did not lower its expectations for interest rate hikes after the lower-than-expected core PCE release. The probability of a 25 basis points rate hike by the Federal Reserve in July remains as high as 87.4%.

【Source：CME 】

Mitrade Analyst：

Unless the job market weakens, the stickiness of service inflation will keep overall inflation at high levels. The US employment supply and demand remain tight, with last month's data showing nonfarm payrolls exceeding expectations in May and job vacancies rising again in April.

Attention is focused on the US June nonfarm employment report to be released this Friday. If the nonfarm data cools down, inflation is expected to ease.

On June 29th, according to data from the US Department of Commerce, the US GDP in the first quarter of 2023 grew by 2% annually, revised upward by 0.7% compared to the previously announced revised data, surpassing market expectations of 1.4%. The upward revision of GDP was mainly driven by increased consumer spending and exports.

The upward revision of GDP has strengthened market expectations for the resilience of the US economy and provided further support for the Federal Reserve's interest rate hikes. In addition to GDP, a series of strong economic data were also released last week in the United States:

Unexpectedly, durable goods orders in May increased by 1.7% on a month-on-month basis, while the expectation was a decrease of 0.9%. At the same time, April data was revised upward from 1.1% to 1.2%, and durable goods orders have been growing for three consecutive months. It is worth noting that commercial equipment orders have grown for the second consecutive month, indicating that businesses are making long-term investments despite headwinds from the Federal Reserve and potential economic downturn risks.

The annualized total number of new home sales in May was 763,000 households, a year-on-year increase of 12.2%, exceeding the expected 675,000 households, with a month-on-month surge of 12.2%.

In terms of sentiment, consumer confidence in the future is also growing. The US Conference Board Consumer Confidence Index reached 109.7 in June, surpassing the expectation of 104 and the previous value of 102.3.

All of these data indicate that the US economy remains resilient despite high interest rates, and market expectations for a "soft landing" or even a "no landing" in the future have risen rapidly.

Mitrade Analyst：

Strong economic data suggests a reduced risk of a "hard landing" for the US economy, but the shadow of an economic recession still lingers. Monetary policy has a lagged impact on the economy, typically taking 5 to 6 quarters to be felt after interest rate hikes. Therefore, we still need to remain vigilant about the downward trajectory of the economy.

Last week, all three major US stock indexes rose as concerns about a recession diminished and inflation cooled. The S&P 500 index increased by 2.3%, accumulating a 15.9% gain in the first half of the year. The Dow Jones Industrial Average rose by 2.0%, with a 3.8% gain in the first half of the year. The Nasdaq Composite also gained 2.0%, achieving a 31.7% increase in the first half of the year.

Notably, the Nasdaq 100 index had an exceptional performance in the first half of the year, rising by 38.8%, its best-ever showing for the first six months. This increase was largely driven by large-cap stocks, with Apple becoming the first company to reach a market capitalization of $3 trillion, and Nvidia nearly doubling in value in the first half of the year.

Historical data shows that in years when the Nasdaq 100 index had a first-half gain of at least 10%, the average second-half gain was approximately 14%. However, in years when the first-half gain exceeded 20%, the average second-half gain narrowed to 8.3%.

Currently, the estimated price-to-earnings ratio of the Nasdaq 100 index is close to 28 times, which is higher than its 10-year average.

【Source：MacroMicro 】

Mitrade Analyst：

The current valuation level of the NASDAQ 100 Index is high, carrying a risk of short-term correction. Investors need to be cautious. This month, the US stock market will enter the second-quarter earnings season. If the financial reports of technology companies exceed expectations, the index is expected to continue its upward trend. Conversely, if the reports fall short, there is an increased risk of a downward correction.