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Weekly Market Recap

17 June, 2024


Our Multi-Asset Solutions team produce a weekly market recap which aims to summarise the previous week’s major events and developments that may impact markets. They try to include points that may aid you in your decision making or conversations with clients. This is supplemented by a market data sheet, offering a summary of financial market performance. Last week’s summary is below. 

Economic and political backdrop

The UK

The UK economy stagnated in April as growth in services output was offset by falls in both production and construction output.

The Conservatives and Labour parties published their manifestos ahead of the 4 July election. Labour’s manifesto promises GBP 7.4 billion of tax rises, including pledges to levy VAT on private school fees, tighten the taxation of non-doms and widen the windfall tax on oil and gas companies. That pays for just GBP 4.8 billion in new spending, which will pay for more teachers and nurses as well as green investment. The Tories have much bigger commitments on both spending and raising money. The party is planning to cut GBP 17 billion in taxes, mainly by reducing the rate of national insurance. But it is less specific on how it will raise that money, for example promising GBP 12 billion of unspecified welfare reductions.

The US

Last week, growth shares strongly outperformed, partially because of reassuring inflation data and falling interest rates, increasing the theoretical value of growth companies’ future earnings. On Wednesday, the Labor Department reported that headline consumer price index (CPI) inflation was flat in May for the first time in nearly two years. Core (less food and energy) prices rose 0.2%, a tick below expectations and a seven-month low. On a year-over-year (YoY) basis, core inflation fell to 3.4%, the lowest level since April 2021.

Producer price index (PPI) inflation, reported Thursday, also surprised on the downside, defying expectations for a slight increase and falling -0.2%. On a YoY basis, core PPI fell back to 2.3%, marking an end to five consecutive months of increases. Relatedly, import prices fell -0.4% in May, their first decline in four months.

Also calming inflation fears – but perhaps raising concerns about the overall health of the economy – were surprise jumps in weekly and continuing jobless claims. Over the week ended 8 June, about 242,000 Americans filed for unemployment, the most in almost a year. Over the previous week, the number of people who had filed at least two weeks of claims hit 1.82 million, the most since the week ended 20 January and the third-highest number over the past year.

Perhaps because of its late arrival, the benign consumer inflation data appeared to have little impact on Federal Reserve (Fed) policymakers, who concluded their scheduled policy meeting on Wednesday. Following the meeting, the Fed released its quarterly summary of individual members’ economic projections. While median growth expectations remained unchanged, expectations for core personal consumption expenditure (PCE) inflation – considered the Fed’s preferred inflation gauge – in 2024 rose from 2.6% to 2.8%.

The Fed left rates unchanged, as was widely expected, but officials increased their median expectation for the federal funds rate at the end of 2024 significantly, from 4.6% to 5.1%, which would imply only one cut later in the year. In their post-meeting statement, however, Fed officials acknowledged that there has been “modest further progress” on inflation – versus “a lack of further progress” in the 1 May post-meeting statement.


European markets started the week on uncertain footing, weighed down by political risk after French President Emmanuel Macron called for snap legislative elections later in June after the EU elections showed a broad shift toward right-wing and far-right parties. Meanwhile, comments from European Central Bank President Christine Lagarde confirming that restrictive monetary policy in Europe has not ended – and not to expect any further rate cuts any time soon – did little to sway the mood.

However, the midweek announcement of weaker-than-expected US consumer price inflation data was a particular source of encouragement, prompting a rally on European equity markets. This revived hopes that more than one US interest rate cut this year may still be in the offing. The ebullient mood, however, proved short-lived, as comments by the Fed following its June meeting seemed to confirm a single cut before the end of 2024.

Macro updates later in the week provided a mixed picture, at best, and meant that European equities generally ended the week negatively inclined. On the plus side, Euro area trade data showed a surplus balance in April, as exports growth far exceeded imports. However, industrial production fell unexpectedly in April, easing -0.1%, against a forecast 2% growth.


The Bank of Japan (BoJ) kept monetary policy unchanged and voted to scale back its Japanese government bond (JGB) purchases – a detailed plan on the tapering for the next one to two years will only be released at its July meeting, however. The decision defied market expectations that the central bank would reduce its massive bond buying this month and was viewed as broadly dovish, as it reaffirmed the likelihood that the pace of monetary normalisation is likely to be gradual.

According to T. Rowe Price International Economist Aadish Kumar, discussions with market participants over the next few weeks will be key in determining the new pace of purchases with the aim of allowing long-term interest rates to be formed more freely in financial markets. Comments by BoJ Governor Kazuo Ueda at the post-meeting press conference came across as more hawkish than the monetary policy statement, as he pointed to a considerable cut in bond buying and also raised the possibility of hiking interest rates in July depending on the data. The July meeting policy changes will coincide with the outlook report that will allow the BoJ to communicate higher confidence in reaching its 2% inflation target sustainably.

Revised data showed that Japan’s GDP contracted by -1.8% on an annualised basis over the first quarter of the year, less than initial estimates of -2.0%, due largely to an upward revision in private inventories. Weakness in the first quarter had stemmed largely from the economic impact of the earthquake that hit Japan’s Noto peninsula in January and the suspension of some auto production. On the inflation front, producer prices increased 2.4% YoY in May, exceeding market expectations of a 2.0% rise.


China’s CPI rose a below expected 0.3% in May from a year earlier, unchanged from April’s rise. Core inflation, which strips out volatile food and energy costs, rose 0.6%, slowing from April’s 0.7% increase. PPI fell -1.4% from a year ago, its 20th month of decline, but eased from a -2.5% drop in April. Weak consumer confidence and a protracted property sector slump have kept a lid on prices in China despite numerous measures from Beijing to prop up the economy and markets over the past year.

Data from the Dragon Boat Festival highlighted the consumer caution in China. Tourism revenue over the three-day holiday rose 8.1% from the 2023 break but lagged pre-pandemic levels, according to Ministry of Culture and Tourism data. Domestic traffic rose 6.3% from last year. However, average spending per traveller fell -12.3% from 2019, Bloomberg reported, citing Citigroup research. Some analysts predict that the government will continue rolling out support to stoke demand as weak consumer sentiment remains a drag on the economy.


Australia added 40,000 jobs in May, better than the market consensus of 30,000. This is a solid labour market print as full-time jobs increased 42,000 over the month. The unemployment rate ticked down to 4.0%. Hours worked, however, fell -0.5% month over month, largely driven by a fall in average weekly hours of full-time workers.


Last week, the MSCI All Country World Index (MSCI ACWI) gained 0.4% (10.8% YTD).

In the US, the S&P 500 Index closed 1.6% higher (14.6% YTD), touching new highs. The market’s advance remained exceptionally narrow for the second consecutive week, however, with an equally weighted version of the S&P 500 trailing its more familiar, capitalisation-weighted counterpart by 214 basis points (bp).

Relatedly, enthusiasm over the potential of artificial intelligence appeared to provide a continuing tailwind to technology-related stocks and growth shares, which outpaced value stocks by the largest margin since March 2023 (456bp), according to Russell indexes. Large caps finished ahead of small caps. Russell 1000 Growth Index returned 3.5% (20.2% YTD), the Russell 1000 Value Index -1.1% (5.6% YTD) and Russell 2000 Index -1.0% (-0.4% YTD). The technology-heavy Nasdaq Composite surged 3.3% (18.3% YTD). The week was also notable for the shareholder approval of Tesla CEO Elon Musk’s roughly USD 48 billion pay package (in the form of Tesla stock), which may have partly reflected enthusiasm over his push for autonomous driving vehicles.

In Europe, the MSCI Europe ex UK Index lost -2.8% (8.6% YTD) as political uncertainty undermined confidence following the strong showing by far-right parties in the European Parliament elections the previous weekend. None of the major European bourses avoided the fallout. Germany’s DAX Index fell -3.0% (7.5% YTD), France’s CAC 40 Index dropped -6.2% (2.1% YTD) and Italy’s FTSE MIB Index shed -5.8% (11.4% YTD). Switzerland’s SMI Index was down -1.7% (11.5% YTD). The euro depreciated versus the US dollar, ending the week at USD 1.07 for EUR, down from 1.08.

In the UK, the FTSE 100 Index slipped -1.2% (7.5% YTD) and the FTSE 250 Index decreased -2.1% (3.8% YTD). The British pound was broadly flat versus the US dollar, ending the week at USD 1.27 for GBP.

Japan’s stock markets registered mixed weekly performance. The TOPIX Index slid -0.3% (17.3% YTD) but the TOPIX Small Index added 1.6% (11.9% YTD). The outcome of the BoJ’s June meeting was viewed as broadly dovish, lending support to equities. In the fixed income markets, the yield on the 10-year JGB fell to 0.94%, from 0.97% at the end of the prior week. The yen, already at historic lows, weakened over the week to JPY 157.4 against the US dollar, from the prior week’s JPY 156.8.

In Australia, the S&P ASX 200 Index dropped -1.7% (4.1% YTD) as a result of the European fallout post elections and reduced number of rate cuts indicated by the Fed dots. Australian government bond yields abated with the curve modestly flattening. The Australian dollar strengthened against the US dollar by 0.5%.

MSCI Emerging Markets Index closed 0.5% higher (6.5% YTD), with a positive contribution to performance from the stock markets of India, Taiwan and South Korea and a negative contribution from those of China and Brazil.

Chinese equities retreated in a holiday-shortened week as data showed that deflationary pressures continued to weigh on the economy. The Shanghai Composite Index declined -0.4% (2.6% YTD), while the blue-chip CSI 300 Index ticked down -0.7% (4.0% YTD). In Hong Kong, the benchmark Hang Seng Index lost -2.0% (7.3% YTD). Markets in China were closed Monday for the Dragon Boat Festival.

In the Czech Republic, the government reported early in the week that inflation in May was measured at a YoY rate of 2.6%. This was lower than expected and lower than the 2.9% YoY reading in April. According to T. Rowe Price credit analyst Ivan Morozov, the cost of food is the main reason for the decline in the YoY rate, but other data indicate mildly softening inflationary pressures. For example, core inflation momentum returned to 2% – which is the central bank’s inflation target – and he believes it is likely to stay around that level.

Overall, Morozov believes that the inflationary picture in the Czech Republic remains benign and that the central bank still has room to reduce short-term interest rates. However, he also anticipates that policymakers are likely to act with caution as they look for indications that inflation remains well behaved.

In Hungary, the government reported that CPI inflation in May was measured at a YoY rate of 4.0%. This was above April’s 3.7% reading, but it was lower than expected.

According to Morozov, the main factor behind the downward CPI surprise was weakness in core inflation, which moderated to a YoY rate of 4.0% versus 4.1% in April. Core inflation momentum picked up to greater than 6%, which reflects the expected repricing of services linked to last year’s inflation. As the time for repricing is over, Morozov believes that core momentum will recede to the 3% to 4% range in the months ahead. He also believes that the central bank has room to reduce short-term interest rates if inflation stays below policymakers’ forecasts.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.9% (0.6% YTD), Bloomberg Global High Yield Index (hedged to USD) 0.4% (3.8% YTD) and Bloomberg Emerging Markets Hard Currency Aggregate Index 0.7% (2.2% YTD).

The downside growth and inflation surprises pushed the yield on the benchmark 10-year US Treasury note sharply lower for the week, down -21bp to 4.22% from 4.43% (up 34bp YTD). The 2-year Treasury yield declined -18bp to 4.71% from 4.89% (up 45bp YTD).

Meanwhile, the investment-grade corporate bond market was quiet over the week with new issuance well below expectations. Spreads widened initially, led by French banks as they felt the effects of political uncertainty in France. Volumes in the high yield market were also below average throughout most of the week, as the inflation releases and Fed meeting kept most issuers on the sidelines.

Europe’s uncertain political environment was acutely reflected in European bond markets. Government bonds sold off sharply early in the week, with 10-year French and Spanish yields surging to their highest levels this year, before ultimately receding toward the week’s end. France's 10-year yield, for example, surged more than 20bp from last week’s close, to around 3.34% on Tuesday, as the snap election raised concerns about the country's already fragile public finances. Meanwhile, German bund yields fell, seemingly due to a bid for safety in reaction to the situation in France. Over the week, the 10-year German bund yield declined -26bp, ending the week at 2.36% from 2.62% (up 34bp YTD).

In the UK, the 10-year gilt yield decreased -21bp, ending the week at 4.05% from 4.26% (up 53bp YTD).

Yoram Lustig, CFA
Head of Multi Asset Solutions,

Michael Walsh, FIA, CFA
Solutions Strategist


Eva Wu,
Solutions Analyst


202406 - 3647709

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