This week saw significant developments across global markets, driven by political turmoil in Europe, mixed economic signals in the U.S., and cautious optimism in Japan. The U.S. market saw a narrow advance, while European markets were rocked by political uncertainty. Japanese equities had mixed results, and Chinese markets faced deflationary pressures. Other key markets like the Czech Republic and Hungary also reported notable economic data.
United States
- The major indexes ended mostly higher, with the S&P 500 Index and Nasdaq Composite touching new highs.
- The market's advance was narrow for the second consecutive week, with an equally weighted version of the S&P 500 trailing its capitalization-weighted counterpart by 215 basis points.
- Technology-related stocks and growth shares outpaced value stocks by the largest margin since March 2023 (461 basis points).
- Shareholders approved Tesla CEO Elon Musk's roughly USD 48 billion pay package.
Inflation and Growth Signals
- Headline consumer price index (CPI) inflation was flat in May for the first time in nearly two years.
- Core prices rose 0.2%, a tick below expectations and a seven-month low.
- Producer price index (PPI) inflation defied expectations, falling 0.2%.
- Import prices fell 0.4% in May, their first decline in four months.
- Weekly jobless claims rose to 242,000, the most in almost a year.
- The Federal Reserve left rates unchanged but increased their median expectation for the federal funds rate at the end of 2024 from 4.6% to 5.1%.
Market Indexes Changes
- DJIA: 38,589.16 (-209.83, 2.39% YTD)
- S&P 500: 5,431.60 (+84.61, 13.87% YTD)
- Nasdaq Composite: 17,688.88 (+555.76, 17.84% YTD)
- S&P MidCap 400: 2,895.31 (-25.39, 4.09% YTD)
- Russell 2000: 2,006.16 (-20.39, -1.03% YTD)
Europe
- The pan-European STOXX Europe 600 Index returned -2.39% due to political uncertainty.
- Italy’s FTSE MIB fell 5.76%, Germany’s DAX gave up 2.99%, and France’s CAC 40 Index shed 6.23%.
- The UK’s FTSE 100 Index finished 1.19% lighter.
Political Risk and Uncertainty
- French President Emmanuel Macron called for snap legislative elections.
- European Central Bank President Christine Lagarde confirmed restrictive monetary policy would continue.
Government Yields
- 10-year French and Spanish yields surged to their highest levels this year before receding.
- German bond yields fell, reflecting a bid for safety.
Japan
- Nikkei 225 Index gained 0.3%, while the broader TOPIX Index fell 0.3%.
- Yield on the 10-year Japanese government bond (JGB) fell to 0.93%.
- The yen weakened to around JPY 157.5 against the USD.
Bank of Japan's Policies
- The Bank of Japan kept monetary policy unchanged and voted to scale back its JGB purchases.
- GDP contracted by 1.8% on an annualized basis in Q1, less than initial estimates of 2.0%.
- Producer prices increased 2.4% year on year in May.
China
- Shanghai Composite Index declined 0.61%, while the blue-chip CSI 300 gave up 0.91%.
- Hong Kong's Hang Seng Index was down 2.31%.
- Consumer price index rose 0.3% in May, unchanged from April.
- Producer price index fell 1.4% from a year ago.
Consumer Confidence
- Tourism revenue over the Dragon Boat Festival rose 8.1% from 2023 but lagged pre-pandemic levels.
- Domestic traffic rose 6.3% from last year.
- Average spending per traveler fell 12.3% from 2019.
Other Key Markets
Czech Republic
- Inflation in May was measured at a year-over-year rate of 2.6%, lower than expected.
- Core inflation momentum returned to 2%, the central bank's target.
Hungary
- CPI inflation in May was measured at a year-over-year rate of 4.0%, above April’s 3.7% but lower than expected.
- Core inflation moderated to a year-over-year rate of 4.0% versus 4.1% in April.
