Weekly Market View from Realm Investment Management. Week ending 3rd June 2022.
Last week, stock-markets gave back some of the previous week’s gains.
Investors are focused on the problem of inflation and whether a recession can be avoided as the US Federal Reserve takes steps to get it under control. However, US economic data released last week was better-than-expected and supportive. Friday’s jobs data beat expectations showing that 390,000 jobs were added in May and the ISM May purchasing managers index rose to 56.1, again beating expectations.
US inflation data released later this week will be closely monitored. Markets are expecting the Fed to raise rates by a further 0.5% this month and next, although there is already speculation that a further hike in September may not now happen. Federal Reserve Vice-Chair Lael Brainard said last week that financial conditions had already tightened a lot but it was too early to say whether inflation had peaked. She added that it was “very hard to see the case” for a pause in rate hikes and “we’ve still got a lot of work to do to get inflation down to our 2% target”.
Eyes are also on the European Central Bank (ECB), as inflation in the eurozone rose 8.1% year-on-year in May, another record high. It is now thought likely the ECB will raise rates from negative to positive in the near future.
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