Equity markets gained ground last week, buoyed by news of a deal on the US debt ceiling and by economic stats highlighting a slowdown in wage growth during May.

Bond yields edged up slightly, with the US 10-year yield back at 3.70% and the German equivalent at 2.35%.

Monetary tightening continues to dampen business trends in manufacturing, as shown by the ISM index contracting for the seventh month in a row in May to 46.9, compared with 47.1 in April. The consensus expected 47 on the dot.

Meanwhile the US labour market was robust, generating 339,000 non-farm jobs in May, which shattered expectations for 230,000. In contrast, the unemployment rate rose by 0.3 of a percentage point to 3.7% of the active population.

The private sector similarly added 278,000 jobs in May, likewise exceeding expectations. Job creation slowed only slightly compared with the 291,000 seen in the previous month.

The average hourly wage increased at an annual rate of 4.3%, just shy of the expected 4.4%, allaying fears of further payroll inflation.

Here in Europe, consumer prices were stable at 0.1% in May after gaining 0.6% in April. In harmonised terms, the index rose by 6% year-on-year, after an increase of 6.9% in April. Price inflation in the eurozone has therefore slowed more sharply than expected, which might now prompt the ECB to moderate its rates policy.

In China, manufacturing activity slowed faster than expected in May in response to slackening demand, with the composite PMI slipping to 48.8 from 49.2 in the previous month. Output from the services sector grew at a slower pace. The broader economic recovery – driven by consumer spending to date – lost momentum in the latest data release.

The S&P 500 ended the week ahead by 1.82% while the tech-heavy Nasdaq swung upwards by 2.04%. The Stoxx 600 Europe index added a meagre 0.20%.

Source: Bonhôte

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