Equity markets were little changed last week as investors awaited the policy decisions from the Fed and ECB, while fears about global economic growth also kept stocks subdued.

Bond yields edge up slightly, with the US 10-year yield at 3.75% and the German equivalent at 2.40%.

In the US, growth in the services sector came in lower than expected in May, with the PMI at 50.3, down from 51.9 in April and versus the forecast for 52.4. In addition, the new orders sub-index dipped to 52.9 from 56.1 the previous month, and the prices paid sub-index slid to 56.2 from 59.6 in April.

Over in the labour market, initial jobless claims rose by 28,000 in the week beginning 29 May to 261,000, compared with 233,000 the previous week and a forecast of 235,000.

The US economy is currently losing growth momentum, which in turn is reducing inflation slowly but surely. This fact ought to prompt the Fed to pause raising rates at the next FOMC meeting on 14 June.

In Europe, Germany’s industrial output recovered marginally by 0.3% in April after contracting sharply in March, reinforcing fears of a prolonged recession in the Eurozone’s leading economy.

In China, exports contracted by 7.5% in May. This led to producer prices falling by 4.6% year-on-year in May, following a 3.6% decrease the previous month. The decline in imports (-4.5%) was not as bad as expected.

After rebounding earlier in the year, China’s economy is facing a slowdown in industrial production resulting from softer global demand. In these circumstances, the Chinese government may consider stimulating domestic spending to bolster its economy.

The S&P 500 ended the week ahead marginally by 0.39% while the tech-heavy Nasdaq headed upwards by 0.14%. The Stoxx 600 Europe index gave up 0.46%.

Source: Bonhôte

If you have any questions please contact the office on (03) 9670 6070.