US stocks however rallied on Friday on signs that a deal on the debt ceiling was taking shape. For the week, the S&P 500 was modestly higher at 0.3%, the Nasdaq rose 2.5% to extend its winning streak to five weeks, while the narrowly focused Dow Jones dropped 1%. Tech names saw strength, particularly artificial intelligence related names, buoyed by Nvidia who delivered blowout quarterly earnings. The chipmaker saw its shares surge 24% on Thursday and ended the week with a market cap of around $936bn.
Friday saw the release of the core personal consumption expenditures price index, the Federal Reserve’s preferred inflation gauge, which rose 0.4% in April, slightly higher than expectations. Furthermore, there was an upward revision to first quarter GDP and personal consumption was up 0.8% last month. The persistence of inflation coupled with the resilience in the economy caused traders to increase bets that the Fed would hike interest rates in June, with odds of a rate cut this year being reduced. The yield on the two-year note hit its highest level since March’s banking volatility, while bills close to maturing around the time the US government could run out of money were also higher on default worries.
European markets saw declines for the week on signs of an economic slowdown in the region as well as monitoring the US debt ceiling impasse. For the week the pan-European STOXX 600 was down 1.6%. Germany’s first quarter GDP figure was downwardly revised to -0.3%, pushing Europe’s largest economy into a technical recession. Germany’s DAX had hit an all-time high the previous week, but ended 1.8% lower for the week. The eurozone consumer confidence index also came in lower than expected. In the UK, headline inflation eased less than forecast, while core inflation hit a 21-year high, fueling bets of another rate hike. In response the yield on the 10-year gilt rose to 4.37% the highest level since October 2022.
Japan’s Nikkei 225 had hit a fresh 33-year high early in the week and while it did ease from its high the index still posted a weekly gain of 0.6%. This was its seventh consecutive weekly advance, helped by upbeat manufacturing data. Chinese semiconductors had got off to a strong start to the week, on news that Beijing had banned operators of key infrastructure from buying Micron Technology products. However Chinese markets struggled to keep momentum amid receding confidence about the strength of China’s economic recovery, with the Shanghai Composite down 2.2% and the Hang Seng down 3.6%.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
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