Australia

Australian shares are expected to gain today after the first half of 2023 ended on a positive note for US equities. The US economy, particularly consumer spending, has held up better than expected given the Federal Reserve’s aggressive policy tightening. While markets have welcomed signs of economic resilience, some investors fear that further interest rate hikes may be warranted to cool down inflation.

ASX futures were 24 points or 0.3% higher as of 7:00am on Saturday, suggesting a positive open.

Modest daily stock gains cinched a strong six months on Wall Street, fueled by investors' optimism that inflation is easing while the economy continues to hum. Fresh spending data added momentum on Friday, showing milder core-price increases in May compared with a month earlier, while consumer outlays continued to rise. The data lifted major US stock indices on a day of calm trading, rounding out the Nasdaq Composite's best first half of a year in four decades.

The tech-centric index climbed 1.45% Friday, sealing a 32% gain since the end of 2022. Enthusiasm about artificial-intelligence breakthroughs has sent investors scurrying into shares of companies such as Microsoft and Nvidia, while upbeat corporate results have also lifted the tech sector's appeal.

The S&P 500 gained 1.2% Friday, locking in a 16% rise since December. The Dow Jones Industrial Average added 285.18 points, or 0.8%, to end the month at 34407.60. The Canadian S&P/TSX index closed 1.2% higher.

In commodity markets, Brent crude oil gained 0.8% to US$74.90 a barrel while gold added 0.6% to US$1,918.89.

Australian government bonds were higher, with the 2 Year yield rising to 4.21% and the 10 Year yield climbing to 4.02%. US Treasury notes were also higher, with the 2 Year yield rising to 4.90% and the 10 Year yield increasing to 3.84%.

The Australian dollar climbed to 66.60 US cents from its previous close of 66.14. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, edged down to 97.48.

Asia

Chinese shares ended higher, adding to gains made in the first half of 2023. A statement from China's cabinet meeting chaired by Premier Li Qiang buoyed sentiment, thanks to plans to promote household consumption in a bid to shore up the economy. Meanwhile, China's official PMI indicated that the country’s factory activity shrank for a third month. Hardware makers and financials led the gains. Foxconn Industrial Internet rose 5.9% and Citic Securities gained 1.75%. Among the losers were telecoms. China Mobile fell 0.8% and China Unicom was 0.6% lower. The Shanghai Composite Index gained 0.6% to 3202.06 and finished the first half of the year 3.65% higher. The Shenzhen Composite Index ended the day 1.1% higher, and the ChiNext Price Index gained 1.6%.

Hong Kong shares fell on the last trading day in 1H, taking year-to-date losses to 4.4%. The Hang Seng Index ended 0.1% lower at 18916.43. China's official PMI showed that factory activity shrank for a third month, adding to concerns that the country's post-Covid recovery is losing steam. July's China Politburo meeting likely offers a window "to discuss more comprehensive policy measures" to shore up the economy, Citi economists said in a note. Tech companies weighed on the market, with the Hang Seng Tech Index dropping 0.6%. Baidu declined 4.2% and JD.com was 3.7% lower. Among gainers were automakers and telecoms. China Unicom rose 5.9%. Xpeng advanced 10% after launching its new G6 model, which is priced 20% lower below rival Tesla's Model Y.

Japanese stocks ended slightly lower, dragged by falls in pharmaceutical shares and trading houses, as signs of US economic strength rekindled concerns about the scope of policy tightening by central banks. Daiichi Sankyo dropped 2.5% and Marubeni Corp. shed 1.9%. Meanwhile, Takashimaya surged 7.7% after the department store operator posted a 60% increase in 1Q net profit on strong sales of luxury brands. The Nikkei Stock Average fell 0.1% to 33189.04.

Indian shares hit another new closing high, led by gains in tech stocks and automakers. Signs of improving US economic strength and easing concerns about domestic inflation likely helped boost sentiment. Infosys advanced 3.2% and Tech Mahindra added 1.9%. Among individual movers, Power Grid Corp. rose 2.0% after announcing plans to invest INR3.89 billion. Tata Communications gained 0.8% after saying that it plans to buy US-based communications-services provider Kaleyra for $100 million cash. The Sensex closed 1.3% higher at 64718.56.

Europe

European stocks rose ahead of an expectedly higher US open, though Asian markets were mixed. The pan-European Stoxx Europe 600 advanced 1.2%, the German DAX gained 1.3% and the French CAC 40 added 1.2%, with banks and property shares leading risers.

"Hopes of Chinese stimulus are helping Asian markets to finish the quarter on a stronger note after data for June showed weaker-than-expected growth in services and a contraction in manufacturing sector activity," IG analysts wrote. "Month- and quarter-end takes place today, with the potential for heightened market volatility."

In London, the FTSE 100 closed up 0.8% to 7531 points, in line with global peers on the back of a robust US trading session. Energy major Shell lifted the market, along with the banking sector, after a better-than-expected Nationwide house price survey, CMC Markets analyst Michael Hewson said in a note.

Retailer Ocado was the British index’s top riser, closing up 5.15%, followed by Hargreaves Lansdown and Centrica, up 4.1% and 3.25%, respectively. Shell shares rose 0.7% as Brent oil was up 1.6% to $75.69. On the opposite side, Airtel Africa led a short list of fallers, closing down 2.2%.

North America

Modest daily stock gains cinched a strong six months on Wall Street, fueled by investors' optimism that inflation is easing while the economy continues to hum. Fresh spending data added momentum on Friday, showing milder core-price increases in May compared with a month earlier, while consumer outlays continued to rise. The data lifted major US stock indices on a day of calm trading, rounding out the Nasdaq Composite's best first half of a year in four decades.

The tech-centric index climbed 1.45% Friday, sealing a 32% gain since the end of 2022. Enthusiasm about artificial-intelligence breakthroughs has sent investors scurrying into shares of companies such as Microsoft and Nvidia, while upbeat corporate results have also lifted the tech sector's appeal.

The S&P 500 gained 1.2% Friday, locking in a 16% rise since December. The Dow Jones Industrial Average added 285.18 points, or 0.8%, to end the month at 34407.60. The Canadian S&P/TSX index closed 1.2% higher.

In the first half of the year, the latest leg of the Federal Reserve's aggressive interest rate increases sometimes shaded trading with fear that tighter financial conditions could stoke a recession. But so far in 2023, markets and the broader economy have dodged a bevy of potential hazards mostly unscathed.

The S&P financial sector rose in the second quarter after a rough first quarter, when a series of bank failures starting in March sparked worries about the industry's health. A last-minute resolution to June's debt ceiling standoff soothed bond market turbulence. The labor market still looks healthy despite some high-profile corporate layoffs.

"Coming into the year, markets overestimated the transmission mechanism of monetary policy in different sectors of the economy, not just the labor market but also in more interest rate sensitive sectors," said Amar Reganti, a fixed-income strategist at Hartford Funds.

More recently, the year's stock rally -- at first concentrated among a small handful of huge technology companies -- has shown signs of broadening. All 11 of the S&P 500's industry sectors gained ground in June.

Solid stock performance has been a welcome surprise this year, but has also shifted investors' focus to the risk that further Fed rate hikes may yet tamp down economic growth, said Anders Persson, chief investment officer for fixed income at Nuveen.

"In the second half, I think we're concerned that there's going to be more scrutiny from investors around what the recession probabilities look like," Persson said. His team believes that bonds are now offering a better tradeoff between risk and reward than stocks are.

Corporate performance has held up better than many analysts expected this year. But a pair of fresh earnings reports drew a tepid response Friday. Nike shares fell 2.6% after the apparel company Thursday evening posted a smaller profit year over year in the latest quarter despite rising sales.

Constellation Brands, which sells Modelo and Corona beer, also said Friday that higher costs weighed on profits even as sales improved. Shares slid 0.3%.

A positive business climate has helped stocks across the board. But goods sellers face headwinds as consumers continue to shift spending toward travel and experiences, said James St. Aubin, chief investment officer at Sierra Mutual Funds.

Makers of physical stuff such as Nike "had their day in the sun during the pandemic, but now the pent-up demand is going to services," he said.

A 2.3% gain lifted Apple's market capitalization above $3 trillion, the first time a company has ended a trading day worth so much.

The stock market will close early on Monday ahead of Independence Day.