In a mixed week for markets, US equities managed to squeeze a little higher taking the index up 20% from its most recent low point on the 12th of October 2022, the level often referred to as a bull market. Data out of the US has started to soften a little, with markets betting that rates will be on hold when the US Federal Reserve meets on the 14th June. Whilst the Canadian central bank surprised markets with a further rate hike this week, having previously paused tightening, increasing rates by a further 0.25% to 4.75%. The Australian central bank also raised rates up to 4.1% from 3.85% and signalled that further tightening may be required. The European Central Bank, which is due to meet on the 15th June is expected to raise rates by a further 0.25% to 3.50%, despite the Eurozone economy contracting by 0.1% in the first quarter. Whilst consumer price inflation released for China only increased by 0.2% for the year to May as the economy struggles to recover from its prolonged period in a Covid induced lockdown.
As of 12pm on Friday, London time, US equities rose 0.3% over the week, whilst technology stocks were flat, having risen by almost 30% since their most recent low point in December of last year. European stocks fell 0.6% on expectations of further interest rate tightening, as did UK equities, with more domestically orientated mid cap stocks falling by 1.0%. Australian stocks fell by 0.3%, whilst the Japanese market, with very low inflation and, if anything wanting it higher, no rate hikes on the horizon rose by 1.9%. Emerging markets increased by 1.0%, with Latin America up by 3.0%, having risen by 12.4% year to date versus 3.9% for the wider EM composite.
Government bonds sold off as central banks continue to tighten monetary policy, with 10-year US Treasuries now yielding 3.75%, German Bunds 2.41% and UK Gilts 4.23%. Whilst the dollar weakened against the Euro and Sterling, now trading at $1.077 and $1.255 respectively.
Commodities rose over the week, helped by weakness in the US dollar. Gold rose by 0.5%, now trading at $1,979 an ounce. Copper is currently priced at $8,336 a tonne, a rise of 1.2% and iron ore rose by 8.4%. European natural gas, having fallen to a level beneath its fifty-year average, rose by 22% to €28.6 per MegaWatt Hours, however, this compares to a price in excess of €300 MWh in August of last year. Despite the announcement by Saudi Arabia of a cut in oil production of 1 million barrels a day, crude oil remained broadly flat, with Brent Crude now trading at $76.2 a barrel and $71.5 for US WTI (West Texas Intermediate).
Data released out of the US by the Institute for Supply Management (ISM) this week, pointed towards a slowdown in the US service sector. The ISM Services Index, which are the results from a survey directed towards service companies on the operating environment they find themselves in, came in at 50.3, with 50 marking the divide between expansion and contraction. The previous reading had come in at 51.9. In addition to this, the initial jobless claims figure for the week exceeded expectations, coming in at 261,000. The latest consumer price inflation data is due out on Tuesday, with an expectation that it will have fallen to 4.1% for the year, or 5.3% excluding food and energy.
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