Disappointment over Apple's AI plans and political uncertainty in France weigh on markets

By Newsdesk

June 12 2024
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Investors were left unimpressed by Apple's revelations about its artificial intelligence (AI) plans at the company's Worldwide Developer Conference yesterday. Despite details about a partnership with OpenAI, the integration of ChatGPT into iPhones via Siri, and promises of on-device workloads and a 'private cloud compute' for additional computational power, Apple shares declined nearly 2%. Elon Musk's threat to ban Apple devices at the office if ChatGPT is integrated at the operating system level due to data security risks added to the negative sentiment.

Disappointment over Apple's AI plans and political uncertainty in France weigh on markets

While the S&P 500 and Nasdaq managed small gains, energy stocks recovered as oil jumped to $78 per barrel following news of fresh US sanctions on Yemeni Houthis. However, Ipek Ozkardeskaya, Senior Analyst at Swissquote Bank, believes that the oil rally triggered by geopolitical news will face solid resistance within the $78-$80 per barrel band and that fundamentally supportive news, such as softer monetary policies, is needed for a sustainable attempt above this resistance level.

In France, political uncertainty and division are taking a toll on markets as Marine Le Pen's far-right party secured 32% of the seats in the EU Parliament. The CAC 40 sold off more than its European peers, the French 10-year yield spiked to the highest levels since November, and the spread between the 10-year French and German yield widened past 55 basis points. The euro also retreated to 1.0732 against the US dollar and is consolidating losses near 1.0770.

While France has a history of being an important pillar of the EU, and the French may take their responsibility and vote accordingly, political turmoil in the coming weeks could lead to higher and wider spreads across EU yields, negatively impacting eurozone growth expectations and stock valuations. This latest turmoil comes at a time when the European Central Bank (ECB) is at a crossroads due to a renewed uptick in inflation, potentially gathering grey clouds for the SXXP near its peak level.

The Federal Reserve (Fed) starts its two-day meeting today and is widely expected to trim its rate cutting projections for this year due to sticky inflation and a still-tight jobs market. The US dollar index spiked past its 50-day moving average following last Friday's surprisingly strong jobs data and is consolidating gains ahead of tomorrow's crucial CPI data and the Fed announcement. Given the economic data and inflation trends, there is a greater chance of a hawkish Fed statement than the contrary.

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