Tech and Disney Weigh on S&P 500 as Geopolitical Risks Boost Safe-Haven Demand | Daily Market Analysis

Key events:

• USA - Initial Jobless Claims
• USA - 30-Year Bond Auction

The S&P 500 reversed its early gains to close lower on Wednesday, as a decline in Super Micro Computer impacted chip stocks and weighed on the broader market.

The Dow Jones Industrial Average fell by 234 points, or 0.60%, the S&P 500 dropped 0.7%, and the NASDAQ Composite declined by 1%.

Walt Disney saw its stock fall 4% after reporting a profit decline in its Experiences segment, which includes parks and consumer products and accounts for just over half of its profits. This was despite its Entertainment unit, encompassing Disney+, Hulu, and ESPN+, posting a profit for the first time.

Gold prices attracted some buying during the Asian session on Thursday but lacked strong bullish momentum and remained below the $2,400 mark. Nonetheless, the precious metal appeared to have ended a four-day losing streak, supported by various factors. Concerns about an economic slowdown in China and a potential US recession, along with geopolitical risks from ongoing conflicts in the Middle East, contributed to the demand for the safe-haven asset.

The EUR/USD pair rebounded to near 1.0935 during the Asian trading session on Thursday, ending a two-day losing streak thanks to a weaker US Dollar. Despite this support, the pair's upside may be limited by risk-off sentiment due to escalating geopolitical tensions. Later today, the weekly US Initial Jobless Claims report will be released.

European Central Bank policymaker Olli Rehn stated on Wednesday that the ECB could continue cutting interest rates if policymakers are confident that inflation is slowing in the near future. The ECB left interest rates unchanged at its July meeting, with ECB President Christine Lagarde noting that the decision for September remains open.

Geopolitical tensions in the Middle East could weigh on riskier assets like the Euro. Caution prevailed in the market after CNN reported late Wednesday that Iran and its proxies might retaliate against Israel, with potential actions delayed until Thursday or Friday.

The Australian Dollar appreciated against the US Dollar following comments from Reserve Bank of Australia Governor Michele Bullock on Thursday. Bullock emphasized vigilance regarding inflation risks and indicated a readiness to hike rates if necessary, suggesting inflation may not return to the 2–3% target range until the end of 2025. The AUD/USD pair also benefited from the RBA's decision to maintain the cash rate at 4.35% on Tuesday.

The Japanese Yen extended its losses against the US Dollar on Thursday, giving up its intraday gains. This decline was influenced by comments from Bank of Japan Deputy Governor Shinichi Uchida, who reiterated that the BoJ would not raise rates amid market instability, as reported by Reuters.

The BoJ's Summary of Opinions from its Monetary Policy Meeting on July 30 and 31 indicated that several members believe economic activity and prices are progressing as expected. They are targeting a neutral rate of "at least around 1%" as a medium-term goal.

The NZD/USD pair saw some dip-buying following a modest pullback from a two-and-a-half-week high and reclaimed the 0.6000 psychological mark during the Asian session on Thursday. This marks the third consecutive day of positive movement, supported by a combination of factors.

The New Zealand Dollar remained bolstered by better-than-expected employment data released on Wednesday, which reduced the likelihood of a rate cut by the Reserve Bank of New Zealand. However, the upward momentum slowed after a survey revealed that New Zealand's two-year inflation expectations fell from 2.33% in Q2 to 2.03% for Q3 2024. Additionally, economic concerns in China acted as a headwind for the Kiwi.