Modi re-elected, but Indian stock market plummeted? Global stock markets under dovish interest rate cut expectations.

1. Macro Data: The U.S. April (generally lagging behind the non-farm payroll data by 1 month) job openings (8.1 million) were lower than expected (value), with job openings continuing to decline and the unemployment rate steadily rising.

Job Openings/Unemployment Rate = 1.24, declining again. What does this mean?

Why is the unemployment rate data so important? As mentioned in previous analysis frameworks, during the Fed's rate hike/cut cycle, when ranking macro data by importance, if the unemployment rate and non-farm payroll data conflict, the unemployment rate should take priority over non-farm payroll data. Why? Because of the prevalence of multiple part-time jobs per person, the focus should be on analyzing marginal changes in "people" rather than "jobs."

Whether it's ① the Job Openings/Unemployment Rate ratio, ② last Friday's PCE data (Will Tonight's PCE Data Be Friendly for "Wall Street"?), or ③ Monday night's ISM Manufacturing PMI data, all point to a "marginally weakening" U.S. economy (not a recession). Currently, "Wall Street" interest rate swaps indicate a 60% probability of a rate cut in September, with Europe poised to start cutting rates (the ECB is expected to cut rates by 25 basis points at its June 6 meeting, lowering the main refinancing rate to 4.25%, the marginal lending rate to 4.50%, and the deposit rate to 3.75%). From an economic perspective, a Fed rate cut is imminent. This Wednesday's ADP and Friday's non-farm payroll and unemployment data will further gauge the rate cut path.

However, political factors such as the presidential election and great power competition must also be considered. The likelihood of one rate cut before the November election is high, given electoral considerations. Great power competition is a constant, and narrowing interest rate differentials post-cut could drive capital outflows.

2. Global Major Stock Markets: UBS Group (UBS) has raised its year-end 2024 forecast for the MSCI World Index from 800 to 830 points. This upward revision is based on improved risk appetite for equities, optimism about AI, and potential slowing U.S. wage growth. The MSCI World Index is a key benchmark for global stock market performance. Expectations of major central banks easing monetary policy, weak global economic data, and AI-driven excitement have supported global equities this year.

1) U.S. Stocks have undergone a "routine adjustment" (Thoughts on the Future Trend of the S&P 500 (.SPX)?);

2) Japan faces low cost-effectiveness due to currency controls and stagnant indices (Japan's 10-Year Bond Yield May Break 1% in the Future);
 

3) India saw a sharp overnight stock market drop as Modi narrowly won the 2024 election with a "slim" majority. On Tuesday, the Nifty 50 IN:NIFTY50 fell 5.9%, its worst day in over four years, nearly erasing all year-to-date gains. Historically, Indian stocks have been known for their long bull runs (India Fund LOF: Why the World's Fourth-Largest Stock Market Has a Long Bull Run);

4) Chinese ADRs and Hong Kong Stocks: In late April, international capital reassessed its Asia-Pacific asset allocation, with pressure on Japanese stocks and funds flowing into Hong Kong (With the Yen Depreciating, Is It Still Worth Investing in Japanese Stocks?), the primary driver of Hong Kong stocks' May rally.

As of June, the Hang Seng Tech Index (Hang Seng Tech ETF: A Different Perspective on Investing) continues to consolidate. If the Fed's dovish rate cut expectations persist or the rate cut path improves, Chinese ADRs may have a chance for a second rebound. $Direxion FTSE China Bull 3X(YINN.US)