Equities in Europe continued to support ultra-easy monetary policy and reports on a massive US fiscal spending plan. In local currency terms, the pan-European STOXX Europe 600 Index ended the week up 1.02%. France’s CAC 40 gained 1.53%, Germany’s Xetra DAX Index added 0.53%, and Italy’s FTSE MIB Index advanced 0.78%. The UK’s FTSE 100 Index ended roughly flat, in part reflecting the UK pound’s appreciation versus the U.S. dollar. The reopening of the economy and comments from Bank of England (BoE) policymaker Gertjan Vlieghe, who said the central bank could increase interest rates in the first half of next year, helped the currency rise for a fifth week in a row.
Core eurozone bond yields eased. Germany’s 10-year bund rallied early in the week, supported by pacifist comments from European Central Bank policymakers, who said they saw no evidence of sustained inflationary pressure, and that ending emergency bond purchases would be premature. Yields abruptly rose toward the end of the week as U.S. Treasury yields dropped. Bond yields in peripheral European markets largely tracked those in the core. UK gilt yields were broadly flat after an unstable week. They followed core markets lower early on, but increased sharply after Vlieghe’s remarks,
Due to differences in wages and immigration, Switzerland abandoned talks on a framework trade agreement with the European Union (EU) that would order access to the single market. The end of the seven-year negotiations means existing treaties with the bloc’s fourth largest trading partner could eventually expire.
US Equities recorded solid gains for the week, bringing the large-cap S&P 500 Index to within roughly 0.5% of the all-time intraday high it established on May 7, and leaving it with a small gain for the month. The technology-heavy Nasdaq Composite and small-cap Russell 2000 indexes performed best. Growth shares easily outperformed their value counterparts; Facebook and Google parent Alphabet helped communication services stocks outperform within the S&P 500, and a rebound in Tesla boosted consumer discretionary shares. The light trading volumes came in advance of the long Memorial Day weekend, with US markets scheduled to close today (Monday, May 31).
Fixed income investors appeared to be reassured by the Fed officials’ comments, with the yield on the benchmark 10-year U.S. Treasury note decreasing over the week. (Bond prices and yields move in opposite directions.) The broad municipal bond market posted positive returns throughout most of the week.
Japan’s stock markets registered a gain for the week, with the Nikkei 225 Index rising 2.94% and the broader TOPIX Index up 2.24%. Signs Japan was speeding up its COVID-19 vaccine rollout were supportive of sentiment. The yield on the 10-year Japanese government bond was broadly unchanged at 0.08%, while the yen weakened notably to around JPY 109.82 against the U.S. dollar.
Chinese equities increased strongly, with both the CSI 300 Index and Shanghai Composite Index posting the best weekly gain in more than three months, according to Reuters. In an attempt to reduce financial risks, policymakers assured zero tolerance for commodity speculation and further cracked down on cryptocurrency mining. Separately, Chinese regulators turned down applications to issue RMB 154 billion of asset-backed securities from various companies, including fintech company Ant Group, according to domestic news portal Sina.com. The amount was twice the amount rejected in 2020, and reflects the government’s renewed focus on curbing financial risks. In credit markets, the yield on the 10-year sovereign bond ended the week at 3.09%.
Last week, witnessed oil, gold, copper, tin, silver and nickel all higher. Gold rose 7.7% in May based on the front month, when the price settled at $1,905.30 an ounce on Friday. That was up 1.3% for the week. Gold prices have risen by nearly $200 an ounce in the past two months, and are up $220 since its 2021 lows in March. It jumped $130 an ounce in May alone.
Oil prices inched higher on Friday, with Brent near $70 a barrel. Brent rose 0.27%, to settle at $69.65 a barrel, but US West Texas Intermediate (WTI) crude dropped 0.36%, to settle $66.61 a barrel. Brent and WTI rose 3.5% and 4.3% respectively in May. Based on Friday’s close for US investors. Brent will trade normally today (Monday).
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