There was a lack of notable economic data releases, with weekly jobless claims rising to 231,000 for the prior week, its highest level since August, while the University of Michigan’s preliminary reading of its consumer sentiment index for May unexpectedly fell to its lowest level in six months. There was however a muted reaction, with focus on this week’s release of the consumer and producer price indexes to see if there is any let up in inflation. For the week, the S&P 500 added 1.9%, closing in on its all-time high, with the more defensive sectors like utilities and industrials outperforming growth peers. The Dow Jones rose 2.2% extending its winning streak to eight sessions, its longest of the year, while the Nasdaq Composite added 1.1%. Treasury yields ended the week little changed, with the yield on the 10-year note ending at 4.50%, a fraction lower.
European markets had a strong week, supported by company earnings and growing optimism around central bank rate cuts. For the week the pan-European STOXX 600 ended 3% higher, its biggest weekly rise since January and closing at a record high. German, French and UK regional indices also closed at record highs. Sweden’s Riksbank became the latest central bank to cut interest rates, reducing its key interest rate to 3.75% from 4.00%. Minutes from the European Central Bank’s April policy meeting also signalled that a rate cut could happen as soon as June. The Bank of England held its key policy rate unchanged but also indicated that it was moving closer to policy easing, highlighting the divergence between European and the US central banks.
In Japan, attention remained on the currency following speculation of intervention in foreign exchange markets the prior week. For the week the yen depreciated further against the US dollar. Despite yen weakness the Nikkei 225 ended marginally below the flatline. There were hints from Bank of Japan governor Kazuo Ueda that there may be further interest rate hikes to counter inflation which may be pressured by the currency weakness. Returning from the prior week’s holiday period, the Shanghai Composite ticked up 1.6%, with tourism revenue growth over the break surpassing pre-pandemic levels. The Hang Seng rose 2.6% over the week. Sentiment was also supported by April China trade data with imports increasing more-than-expected and exports reversing a decline.
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.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.