Equity indices gained ground last week, driven by tech and banking sectors and helped by the Fed Chair’s comments on the US economy and the chances of a let-up in monetary tightening.

In contrast, bond yields edged up slightly, with the US 10-year yield back at 3.70% and the German equivalent at 2.40%.

In US economic activity, the Empire State Manufacturing Survey for New York State showed a marked decline in May, clocking in at -31.8, compared with +10.8 in April. This indicates that economic activity is slowing in this important area.

By contrast, US industrial production rose by 0.5% last month according to the Fed. Economists were generally expecting no change. In detail, manufacturing output advanced by 1%, supported by a sharp acceleration in the automotive sector. Utilities output contracted by 3.1% due to lower demand for heating.

On a household level, retail sales rose less than expected in April, increasing by only 0.4% after a 0.7% decline in March. However, if the automotive and oil sectors are left out, retail sales rose by 0.6% versus a forecast of 0.2%.

The labour market remains strong. Initial jobless claims fell more than expected last week, to 242,000 from 264,000 the previous week. Economists on average were looking for 254,000 new claimants.

Concerning inflation in Europe, Germany’s industrial producer price index rose by 4.1% in April year-on-year, indicating a marked slowdown from the 6.7% increase in March. The main factor driving the rise in producer prices in April was capital goods, the price of which rose by 6.8%. Energy prices increased by only 2.8% year-on-year. Excluding energy, the headline index rose by 4.8%.

The S&P 500 ended the week ahead by 1.65% while the tech-heavy Nasdaq swung upwards by 3.04%. The Stoxx 600 Europe index added 0.72%.

Source: Bonhôte

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