This week's global market update highlights mixed performances across major benchmarks, varying economic signals, and significant policy changes in Europe, Japan, and China. The U.S. saw growth in services but a slump in manufacturing, while Europe experienced a rate cut from the ECB. Japan's mixed market returns were influenced by currency interventions, and China faced a retreat despite positive property sector data.
United States
Major benchmarks end mixed as longer-term bond yields fall
- The S&P 500 Index and Nasdaq Composite reached record intraday highs, while smaller-cap indexes pulled back.
- Growth stocks outpaced value shares significantly due to falling longer-term interest rates.
- AI sector faced headwinds as U.S. officials slowed issuing licenses for AI chip sales to the Middle East.
Manufacturing slump continues…
- ISM reported a contraction in manufacturing activity (48.7).
- Job openings in April fell to their lowest level (8.059 million) since February 2022.
- The quits rate, an indicator of labor market strength, surprised on the upside.
…as services sector remains strong
- ISM’s services index jumped to 53.8 in May, the highest in nine months.
- ADP reported private sector job gains of 152,000, the lowest in four months.
- Labor Department's report showed an addition of 272,000 jobs in May.
Mixed inflation signals
- Unemployment rate increased to 4.0%, while average hourly earnings rose 0.4%.
- ISM data suggested easing price pressures in manufacturing due to falling commodity prices.
- 10-year U.S. Treasury note yield hit a two-month low of 4.28% on Thursday.
- Investment-grade corporate bond market spreads widened, while high-yield market benefited from tech stock rally.
Market Indexes Changes
- DJIA: 38,798.99 (+112.67, +2.94% YTD)
- S&P 500: 5,346.99 (+69.48, +12.10% YTD)
- Nasdaq Composite: 17,133.12 (+398.10, +14.13% YTD)
- S&P MidCap 400: 2,920.70 (-62.16, +5.00% YTD)
- Russell 2000: 2,026.55 (-43.57, -0.03% YTD)
Europe
ECB cuts rates, but no hint on future decisions
- ECB reduced its deposit rate by a quarter point to 3.75%.
- Inflation forecast for 2024 revised to 2.5% from 2.3%.
- ECB President Christine Lagarde highlighted mixed inflation data and company profit margins absorbing wage growth.
Wieladek: Two more ECB rate cuts likely, but moves will depend on forecasts
- Potential for two additional rate cuts in 2024, likely in September and December.
Danish central bank cuts rates
- Denmark's central bank lowered its benchmark rate by a quarter point to 3.35%.
Japan
Mixed weekly returns
- Nikkei 225 Index up 0.5%, TOPIX Index down 0.6%.
- Yen strengthened to around JPY 155 against the USD.
- Services sector continued to expand sharply in May.
Bank of Japan expected to taper bond buying, keep interest rates unchanged
- 10-year JGB yield fell to 0.98%.
- Speculation of BoJ tapering bond buying at the June meeting.
Finance Ministry confirms currency intervention to prop up the yen
- Intervention in the foreign exchange market confirmed for April 29 to May 29.
China
Stocks retreat despite positive property sector data
- Shanghai Composite Index declined 1.15%, CSI 300 Index down 0.16%.
- Hong Kong's Hang Seng Index rose 1.59%.
- New home sales by top 100 developers rose 11.5% in May.
Exports exceed forecasts
- Exports rose 7.6% in May, imports increased 1.8%.
- Overall trade surplus increased to USD 82.62 billion.
Other Key Markets
South Africa: Post-election coalition discussions likely to be complex
- ANC lost its majority but won the most seats (about 40%).
- Political uncertainty and market volatility expected in the weeks ahead.
Mexico: Magnitude of President-elect Sheinbaum’s victory surprises investors
- Claudia Sheinbaum Pardo won the presidency by wide margins.
- Her coalition secured a qualified majority in the Lower House.
- Challenges expected in implementing fiscal adjustments.
