On Tuesday the job openings report for April came in softer-than-expected, falling to the lowest level in over two years. This also followed on from ISM’s gauge of manufacturing activity sliding further into contraction, reinforcing expectations for a Fed rate cut. Stocks however sold off on Friday following the release of the non-farm payrolls data, whereby a higher-than-expected 272,000 jobs were added last month, with average hourly earnings also topping forecasts. Even with a slight uptick in unemployment, the report prompted traders to reassess rate moves, now pricing in around a 50% chance of a cut at the September meeting.
Despite losses seen on Friday, the major large cap US indices notched weekly gains. The S&P 500 rose 1.3% having touched fresh highs earlier, the Nasdaq Composite was up 2.4% and the Dow Jones Industrial Average added 0.3%. Growth stocks led the way, with Nvidia notably overtaking Apple as the second most valuable company during the week. Meanwhile meme stocks such as AMC still saw tumultuous performance. In contrast small caps lagged for the week. Treasury yields jumped following Friday’s jobs report however for the week they ended lower, with the 10-year Treasury yield closing at 4.434%.
European markets also had a negative Friday over Fed rate uncertainty, however early gains meant that they were able to record their first weekly advance following two down weeks. The pan-European STOXX 600 advanced 1% overall, with most regional indices seeing slight gains, the UK market an exception. Earlier in the week, the Bank of Canada cut interest rates and on Thursday the European Central Bank (ECB) became the next major bank to cut rates. The ECB reduced its deposit rate by 25bps as expected although did not deliver any guidance on future cuts, somewhat to the disappointment of markets.
Japan’s Nikkei 225 was up 0.5% for the week, with support seen from the services purchasing managers’ index for May. Attention will turn to this week’s Bank of Japan meeting and whether the central bank will taper its bond purchasing. The Hang Seng added 1.6% for the week, however bucking the wider trend on the mainland the Shanghai Composite lost 1.2%. China’s exports in May came in higher than expectations, rising 7.6%, however this was somewhat overshadowed by reports that a group of US lawmakers were pushing for a ban of imports from two Chinese battery makers.
It was a busy week for elections, prompting market gyrations. In Mexico, Claudia Sheinbaum from the ruling Morena party won the presidential election, as expected. However, markets were surprised by the margin of the win, with the party securing a qualified majority in the Lower House and close to that in the Senate, prompting concerns over the passing of constitutional reforms. For the week, Mexican equities were down nearly 4%. In India, the Nifty 50 index had touched a fresh high on Monday as exit polls forecast another election victory for Narendra Modi. However, the following session it dropped over 5% as the expected Modi landslide didn’t materialise, having to rely on alliance members to attain the necessary seats to form a coalition, but later managed to bounce back.
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