Key News and Events
- U.S. jobs reports came in well above expectations, as Non-Farm Payrolls increased by 224,000, beating forecasts for 160,000. This was the largest increase in five months, easing concerns about a slowdown and dampening expectations for the number of rate cuts by the Federal Reserve in the second half of this year.
- European leaders have nominated International Monetary Fund Managing Director Christine Lagarde to be the next European Central Bank (ECB) president and German Defense Minister Ursula von der Leyen to lead the European Commission.
- Kyriakos Mitsotakis’s New Democracy party won the snap General Elections in Greece, defeating the incumbent Syriza party of Alexis Tsiparas.
- The Japanese government announced new export restrictions on key materials used in semiconductor manufacturing to South Korea, which could be especially damaging due to Japanese suppliers' dominant market share in many vital chemicals used in semiconductor manufacturing. This follows a South Korean court ruling ordering compensation for Korean victims of forced labor during World War Two.
Week in Markets
- Global equity markets rose over the week, benefiting from an improving trade outlook as US and China agreed to resume trade negotiations.
- The S&P 500 index rose by 1.7% over the week, outperforming the MSCI World index, which rose by 1.3%. On a year-to-date basis, S&P 500 index outperformed the MSCI World index (20.5% vs 18.9%).
- U.S. Large Cap stocks outperformed Small Cap stocks over the week, as the S&P 500 index rose by 1.7% while the Russell 2000 index rose by 0.6%. On a year-to-date basis, the S&P 500 index outperformed the Russell 2000 index (20.5% vs 17.7%).
- Growth stocks outperformed Value stocks over the week as measured by the MSCI USA Growth and Value index. Growth Stocks rose by 1.9% while Value Stocks rose by 1.5% over the week. On a year-to-date basis, Growth Stocks outperformed Value Stocks (25.1% vs 16.7%).
- The 10-year U.S. treasury yield rose by 5bps to 2.04% and 30-year U.S. treasury yield rose by 2bps to 2.55% over the week. Yields rose sharply towards the end of the week following better than expected US jobs data.
- The 20-year TIPS yield rose by 3bps to 0.58% and 20-year breakeven inflation was unchanged at 1.76% over the week.
- The spreads on the Bank of America Merrill Lynch U.S. Corporate Index fell by 3bps to 119bps and the spreads on the Bloomberg Barclays Long Credit Index fell by 2bps to 159bps over the week.
- The U.S. High Yield bond spread over U.S. treasury yields fell by 9bps to 398bps and the spread of USD denominated EM debt over U.S. treasury yields fell by 12bps to 340bps over the week.
- The S&P GSCI index fell by 0.7% in USD terms over the week.
- The S&P GSCI Energy index fell by 1.0% as the price of WTI crude oil fell by 1.6% to US$58/BBL.
- Industrial Metal prices fell by 1.4% as copper prices fell by 1.9% to US$5,857/MT.
- Agricultural prices fell by 0.2% and gold prices fell by 1.4% to US$1,389/Oz.
- The U.S. dollar appreciated against all major currencies over the week.
- Sterling depreciated by 1.7% against the U.S. dollar over the week, ending the week at ¥1.25/$.
- The euro depreciated by 1.5% against the U.S. dollar over the week, ending the week at ¥1.12/$.
- The Japanese yen depreciated by 0.7% against the U.S. dollar over the week, ending the week at ¥108.47/$.
- The Canadian dollar depreciated by 0.3% against the U.S. dollar over the week, ending the week at ¥1.31/$.
Highlighted Last Week Releases
Change in Nonfarm Payrolls
U.S. jobs reports came in well above expectations, as Non-Farm Payrolls increased by 224,000, beating forecasts for 160,000. This was the largest increase in five months, easing concerns about a slowdown and dampening expectations for the number of rate cuts by the Federal Reserve in the second half of this year.
Markit/CIPS UK Composite PMI
The UK Purchasing Managers' Index fell by 1.2 points to 49.7 in June. This signaled the first contraction in private sector economic activity in nearly three years, as it reached the lowest levels since immediately after the Brexit referendum in June 2016.
Retail Sales MoM
Retail sales in the Euro area unexpectedly contracted by 0.3% in the month of May, despite expectations of a 0.3% increase. This is partly driven by a 1.3% slump in automotive trades, which is reflected in a 0.6% contraction in Germany retail sales,
Sources: Global Asset Allocation, Bank of America Merrill Lynch, Barclays Capital, Factset. Click here for index descriptions.
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