Stocks in Europe were broadly flat last week but the US had a strong week following the approval of the debt ceiling agreement.
US equities had a strong end to the week despite Friday’s payrolls report which showed the economy added 339,000 jobs in May. The number was much higher than expected and continues to indicate a tight labour market suggesting the Fed may not have room to cut rates any time soon. Inflation and the Fed’s response remain the focus for the market; the Central Bank’s next announcement will be Wednesday 14th June (important inflation data will be released the day before). The majority of investors expect interest rates will be left unchanged at that meeting but more than half are currently expecting another 0.25% hike in July.
Tempering that expectation a little was US manufacturing data released on Thursday. The Institute for Supply Management (ISM) reported that its Manufacturing Purchasing Managers’ index (PMI) fell to 46.9 in May. This was the 7th consecutive month of contraction (below 50).
In the UK the Bank of England is widely expected to raise interest again on June 22nd to 4.75%. The yield on the 10-year Gilt rose through May, currently above 4.2%, not far below this year’s high of 4.43%. The peak was 4.63% in October last year.
US Risk Barometer 2nd June 2023
Europe Risk Barometer 2nd June 2023
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