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Weekly Market Recap

10 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 will be holding parliamentary elections on 4 July. At the moment, the polls favour a landslide win of the Labour party with a very large majority. Since the election was called, the already large lead of the Labour party has increased slightly. However, with the first past the post system, even small changes in votes can make a significant difference to the overall outcome. The Labour Party has not released an election manifesto yet. However, it is expected that the party will be cautious with its fiscal policy and will aim to implement some supply side reforms, such as making more land available for residential development.

The US

The start of the week brought some downbeat economic readings, which appeared to lead to a return of worries about slowing growth alongside high inflation – or “stagflation” – among some investors. In particular, the Institute for Supply Management (ISM) reported on Monday that its gauge of manufacturing activity had fallen further into contraction territory (48.7, with levels below 50.0 indicating contraction).

On Tuesday, the Labor Department reported that job openings in April had fallen to their lowest level (8.059 million) since February 2022. Conversely, the number of Americans leaving their jobs voluntarily, the so-called quits rate – considered by many as a more reliable indicator of the strength of the labour market – surprised on the upside.

The picture arguably brightened at midweek, however. The ISM’s services jumped to 53.8 in May, its highest level in nine months and well above consensus expectations. On the same day, payroll processor ADP reported its tally of private sector job gains, which fell to 152,000, the lowest level in four months. The twin reports seemed to help replace the stagflation narrative with a possible “Goldilocks” scenario of growth that was neither too hot nor too cold in the minds of many investors.

The upside surprise in the Labor Department’s official jobs report on Friday morning appeared to derail this narrative, but only temporarily. According to its broader tally of both private sector and government nonfarm jobs, employers added 272,000 jobs in May, well above consensus expectations and the most since the start of the year. The market's reaction to the news may have been tempered by an unexpected rise in the unemployment rate to 4.0%, its highest level since January 2022.

The week’s inflation signals were also mixed. Even as the unemployment rate increased, average hourly earnings rose 0.4%, above consensus and the most since January. The ISM data suggested that overall price pressures were concentrated in the much larger services sector while easing in the struggling manufacturing sector, due largely to falling commodity prices. On balance, fixed income investors appeared to interpret the news as signs of easing inflation pressures.


The European Central Bank (ECB) reduced its deposit rate by 25 basis points (bp) to 3.75%, as expected, but it stopped short of indicating that more cuts could follow. “Based on an updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission, it is now appropriate to moderate the degree of monetary policy restriction after nine months of holding rates steady,” the Governing Council said in a statement. However, reading from the statement at a press conference, ECB President Christine Lagarde added: “We are not pre-committing to a particular rate path. Despite the progress over recent quarters, domestic price pressures remain strong as wage growth is elevated, and inflation is likely to stay above target well into next year.”

The ECB forecast that inflation would average 2.5% in 2024, an upward revision from the previous estimate of 2.3%. The central bank also revised its estimate of average inflation for 2025 to 2.2% from 2.0% but held its forecast for 2026 at 1.9%.

T. Rowe Price European Economist Tomasz Wieladek notes that Lagarde indicated that the inflation data presented a mixed picture. Importantly, the ECB president highlighted that underlying inflation slowed again in April and that company profit margins were starting to absorb wage growth. She also said that the Governing Council’s confidence in the inflation forecast drove the ECB’s decision. Lagarde said that the road ahead would be bumpy, implying that policymakers would change with the data. Wieladek sees the potential for two additional rate cuts this year, most likely in September and December – although this purely data-dependent approach means that there might only be one.

Denmark's central bank lowered its benchmark rate by 25bp to 3.35%, following the ECB’s move.


In the fixed income markets, the yield on the 10-year Japanese government bond (JGB) fell to 0.97%, from 1.06% at the end of the previous week, tracking US Treasury yields lower. Speculation was rife that the Bank of Japan (BoJ) would taper its bond buying at its next monetary policy meeting on 13-14 June, allowing markets to drive rates more, in a further shift away from its highly stimulative policy stance. BoJ Governor Kazuo Ueda has asserted that the central bank would be ready to step in to avoid a sharp tightening in financial conditions, however.

With regards to raising interest rates, Ueda said that the BoJ would move cautiously to avoid making any big mistakes. While it is widely expected to keep interest rates unchanged at its June meeting, it is likely to keep taking incremental tightening steps, given improving global growth and Japan’s inflation trends.

Japan’s Finance Minister Shunichi Suzuki confirmed that his ministry had intervened in the foreign exchange market in the period from 29 April to 29 May to counter excessive currency moves. He deemed the yen-buying to have had some effect. The efficacy of such interventions in propping up the historically weak yen is limited by the wide US-Japan interest rate differential, which is likely to keep weighing on the Japanese currency.


The value of new home sales by the country’s top 100 developers rose 11.5% in May, up from April’s 3.4% increase, according to the China Real Estate Information Corp. New home sales slumped -33.6% in May from a year ago but eased from April’s -45% decline. The data boosted hopes that China’s property market downturn, now in its fourth year, may start to recover after Beijing announced a rescue package in May to stabilise the struggling sector. However, some analysts remained sceptical about whether the measures will result in a sustainable housing recovery amid weak domestic demand.

In economic news, the private Caixin/S&P Global survey of manufacturing activity edged up to 51.7 in May from April’s 51.4, marking its seventh monthly expansion. Readings above 50 indicate an expansion from the prior month. The Caixin services purchasing managers’ index (PMI) reached an above-consensus 54 in May, rising from 52.5 in April. The private Caixin survey, focusing on smaller and export-oriented firms, contrasted with official data the prior week showing that manufacturing activity unexpectedly contracted in May.

China’s exports rose a better-than-expected 7.6% in May from a year earlier, up from 1.5% growth in April. Imports increased a weaker-than-expected 1.8% in May, slowing from April’s 8.4% rise. The overall trade surplus increased to USD 82.62 billion, up from USD 72.35 billion in April. While strong overseas demand has driven China’s exports despite the threat of new tariffs, analysts noted that the disappointing imports growth indicated weak consumer spending at home.


Australia’s Fair Work Commission announced a 3.75% increase to award wage rates and the minimum wage, much softer than last year. This indicates further easing in wage growth in 2024-25. Australian housing prices rose 0.5% month over month in May, supported by lower priced housing. Australia first-quarter GDP came in at 0.1% quarter over quarter, a touch below consensus and the lowest (ex-Covid) level since 1992. Net trade and private investment were the largest detractors.


Last week, the MSCI All Country World Index (MSCI ACWI) gained 1.2% (10.4% YTD).

In the US, the S&P 500 Index closed 1.4% higher (12.8% YTD) and the technology-heavy Nasdaq Composite surged 2.4% (14.5% YTD), both reaching record intraday highs. However, smaller caps pulled back, with the Russell 2000 Index falling -2.1% (0.6% YTD). Growth stocks outpaced value shares by the widest amount since early in the year, as falling longer-term interest rates increased the notional value of future earnings. The Russell 1000 Growth Index rallied 2.7% (16.1% YTD) while the Russell 1000 Value Index lost -0.8% (6.8% YTD), as investors appeared to weigh contradictory data from the week’s busy economic calendar.

Some of the steam seemed to come out of the fast-growing artificial intelligence (AI) sector. News arrived that US officials have slowed the issuing of licenses to chipmakers for AI chip sales to the Middle East and were opening antitrust investigations into Microsoft and NVIDIA over their dominance of AI.

In Europe, the MSCI Europe ex UK Index added 1.6% (11.7% YTD) after the ECB on Thursday cut interest rates for the first time in five years. Major stock indexes recorded gains. Germany’s DAX Index tacked on 0.3% (10.8% YTD), France’s CAC 40 Index gained 0.2% (8.8% YTD) and Italy’s FTSE MIB Index advanced 0.5% (18.3% YTD). Switzerland’s SMI Index was up 2.1% (13.4% YTD). The euro was little changed versus the US dollar, ending the week at USD 1.08 for EUR.

In the UK, the FTSE 100 Index slipped -0.2% (8.8% YTD) and the FTSE 250 Index declined -0.8% (6.0% YTD). The British pound was broadly flat versus the US dollar, ending the week at USD 1.27 for GBP.

Japan’s stock markets generated mixed weekly returns. The TOPIX Index slid -0.6% (17.7% YTD) and the TOPIX Small Index lost -1.0% (10.2% YTD). A tentative rally in the yen, which strengthened to JPY 156.8 against the US dollar, from the prior week’s JPY 157.3, posed a headwind for Japanese exporters. However, the latest PMI data showing that the country’s services sector continued to expand at a sharp pace in May lent support to sentiment. There were also some signs that private consumption could stop being a drag on growth, as household spending increased year on year in April, the first increase in 14 months.

In Australia, the S&P ASX 200 Index advanced 2.1% (5.9% YTD) on the back of the signs of easing wage pressure in Australia, a strong US tech stock rally, and the highly anticipated first ECB rate cut. Australian government bond yields abased with the curve modestly flattening. The Australian dollar strengthened against the US dollar by 0.4%.

MSCI Emerging Markets Index closed 2.4% higher (6.0% YTD), with a positive contribution to performance from the stock markets of India, Taiwan and South Korea and a negative contribution from that of Brazil.

Stocks in China retreated despite data showing that the property sector may be gaining traction. The Shanghai Composite Index declined -0.9% (3.1% YTD), while the blue-chip CSI 300 Index was flat (4.7% YTD). In Hong Kong, the benchmark Hang Seng Index rallied 1.9% (9.5% YTD).

In South Africa, the country held its general elections on Wednesday, 29 May, and the ruling African National Congress (ANC) political party – which has held power for three decades – performed worse than expected. Although the ANC lost its majority, it did win the most seats (about 40%) in the National Assembly, which, according to T. Rowe Price analyst Roy Adkins, puts it in a strong position in coalition negotiations with other parties. However, given the ANC’s previous dominance, most parties are relatively inexperienced in these types of negotiations, so Adkins expects political uncertainty and market volatility to prevail in the weeks ahead.

Adkins expects coalition discussions to be influenced by three primary factors: a desire for influence at the national level, the interaction of potential for joining a national level coalition with the potential for joining a coalition in the provincial level governments, and internal party dynamics. Balancing these three primary factors will make for very complex negotiations that will take time to complete and could generate significant swings in market sentiment.

In Mexico, the country held its general elections on Sunday, 2 June, and the results surprised investors. While Claudia Sheinbaum Pardo from the ruling Morena party was expected to win the presidency, she defeated her two closest competitors by wide margins. In addition, her coalition – which was expected to maintain a simple majority in both chambers of the legislature – won enough votes to secure a qualified majority in the Lower House and is just a few seats shy of a qualified majority in the Senate. With the help of typical political negotiations, this will facilitate the Morena party’s ability to pass constitutional reforms – a goal of outgoing President Andrés Manuel López Obrador (AMLO), who encountered obstacles in passing a number of reforms that he introduced during his administration.

According to T. Rowe Price emerging markets sovereign analyst Aaron Gifford, a Sheinbaum administration is likely to be similar to AMLO’s in many respects. On the positive side, the president-elect emphasised the importance of central bank independence, prudent fiscal management, and private and foreign investment during her acceptance speech on Sunday night. On the other hand, she pledged to maintain fuel and electricity subsidies, increase social welfare programmes, and continue AMLO’s pet projects. Gifford believes that these commitments pose risks given Mexico’s deteriorating credit fundamentals. GDP growth has been slowing during the first few months of the year, and the budget deficit has surpassed 5% of GDP, as AMLO – who remains popular with constituents – increased government spending ahead of the elections.

Despite pledges of fiscal responsibility, Sheinbaum will need to implement fiscal adjustments during her first full year in office to adhere to Mexico’s fiscal rules. Gifford believes that this will be a challenging task given the rigidity in spending, promises of increased social and infrastructure expenditures, and Sheinbaum's commitment to not raise taxes.

Last week, the Bloomberg Global Aggregate Index (hedged to USD) returned 0.4% (-0.3% YTD), Bloomberg Global High Yield Index (hedged to USD) 0.1% (3.3% YTD) and Bloomberg Emerging Markets Hard Currency Aggregate Index was broadly flat (1.5% YTD).

The yield on the benchmark 10-year US Treasury note hit an over two-month intraday low (4.28%) on Thursday. While the yield jumped after the Friday jobs report, it still decreased -7bp over the week to 4.43% from 4.50% (up 55bp YTD). The 2-year Treasury yield rose 2bp to 4.89% from 4.87% (up 64bp YTD).

Meanwhile, spreads in the US investment-grade corporate bond market widened over the course of the week. Issuance was slightly above expectations, though a large number of issues were oversubscribed. On the other hand, the high yield market benefited from the rally in tech stocks.

Over the week, the 10-year German bund yield declined -4bp, ending the week at 2.62% from 2.66% (up 60bp YTD).

In the UK, the 10-year gilt yield decreased -6bp, ending the week at 4.26% from 4.32% (up 73bp YTD).

Yoram Lustig, CFA
Head of Multi Asset Solutions,

Michael Walsh, FIA, CFA
Solutions Strategist


Eva Wu,
Solutions Analyst


202406 - 3633195

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