Market Review

Global Markets Weekly Update

June 02 2023

Review the performance of global stock and bond markets over the past week, along with relevant insights from T. Rowe Price economists and investment professionals.


The major benchmarks ended with solid gains for the week, with the S&P 500 Index touching its highest intraday level since mid-August 2022. The technology-heavy Nasdaq Composite Index notched its sixth consecutive weekly gain and hit its best level since mid-April 2022. In contrast with the past several weeks, however, the rally was broad-based, with strong gains in both value and growth stocks, as well as small-caps. Markets were closed on Monday in observance of Memorial Day.

Investors shrug off debt ceiling agreement

News that the White House and Republican congressional leaders had reached an agreement over the preceding weekend to raise the federal debt limit and stave off a default on governmental obligations seemed to have limited impact on sentiment—perhaps because enough signals had previously emerged that a deal was imminent. The House of Representatives passed the bill by a surprisingly large margin on Wednesday, but this also seemed to have limited impact on markets. After the Senate’s passage of the measure late Thursday, the bill headed to President Joe Biden on Friday for his signature into law.

Instead, investors appeared to return their attention to economic data. On Wednesday, stocks pulled back following news that job openings rebounded much more than expected in April and hit their highest level (10.1 million) since January. March’s data were also revised higher. T. Rowe Price traders noted that the probability of a mid-June Federal Reserve interest rate hike priced into futures markets jumped to 71% on the news—compared with only 23% a month earlier.

Friday’s closely watched nonfarm payrolls report also surprised on the upside, but the details in the report seemed to suggest that the labor market might be cooling. Employers added 339,000 jobs in May, well above consensus expectations for around 190,000. But the unemployment rate—estimated by surveys of households—also surprised by rising to 3.7% from 3.4%. Suggesting a more difficult job market for workers, the Labor Department reported that the number of people losing jobs or completing temporary jobs jumped significantly in May and reached its highest level since February 2022. The number of longer-term unemployed remained relatively constant, however.

Cooling factory prices bode well for inflation

Another encouraging sign for interest rates and investors was the release Thursday of the Institute for Supply Management’s (ISM’s) Manufacturers Purchasing Managers’ index for May. The ISM’s gauge showed a seventh straight monthly contraction in factory activity, as expected. Encouragingly, however, prices paid for supplies and other inputs by manufacturers contracted at the fastest pace since December, defying expectations for a modest increase.

The encouraging inflation signals appeared to drive a decrease in longer-term U.S. Treasury yields, while the finalization of a debt ceiling agreement led to a plunge in the yield on one-month Treasury bills, from 6.02% intraday the previous Friday to 5.28% at the end of the week. The debt ceiling agreement provided an additional tailwind to the municipal market, according to our traders.

New issuance was front-loaded in the investment-grade corporate bond market, with a sizable offering from retailer CVS. According to T. Rowe Price traders, early redemptions, coupon payments, and tenders added over USD 6 billion to the high yield bond market this week and supported prices. Positive developments in the debt ceiling negotiations also bolstered the performance of broader risk markets. The primary market was quiet with limited issuance, but our traders noted that more new deals are expected to be announced next week.

Our traders reported that buyers emerged in the bank loan market amid the broader risk rally after the debt ceiling bill passed the House and investors turned their attention to monthly jobs data. Our traders noted that idiosyncratic situations drove most of the secondary loan market’s activity.

U.S. Stocks

Friday’s Close

Week’s Change

% Change YTD





S&P 500




Nasdaq Composite




S&P MidCap 400




Russell 2000




This chart is for illustrative purposes only and does not represent the performance of any specific security. Past performance cannot guarantee future results.

Source of data: Reuters, obtained through Yahoo! Finance and Bloomberg. Closing data as of 4 p.m. ET. The Dow Jones Industrial Average, the Standard & Poor’s 500 Stock Index of blue chip stocks, the Standard & Poor’s MidCap 400 Index, and the Russell 2000 Index are unmanaged indexes representing various segments of the U.S. equity markets by market capitalization. The Nasdaq Composite is an unmanaged index representing the companies traded on the Nasdaq stock exchange and the National Market System. Frank Russell Company (Russell) is the source and owner of the Russell index data contained or reflected in these materials and all trademarks and copyrights related thereto. Russell® is a registered trademark of Russell. Russell is not responsible for the formatting or configuration of these materials or for any inaccuracy in T. Rowe Price’s presentation thereof.


In local currency terms, the STOXX Europe 600 Index was little changed. The pan-European index clawed back losses after data showed that eurozone inflation had slowed, and the U.S. Senate approved a bill to suspend the statutory limit on government borrowing. Major stock indexes were mixed. The UK’s FTSE 100 Index eased 0.26%, while France’s CAC 40 Index gave back 0.66% of its value. In Italy, the FTSE MIB advanced 1.33%. Germany’s DAX climbed 0.42%.

Eurozone inflation slows but ECB policymakers warn on rates

Headline inflation in the eurozone slowed to an annual 6.1% in May from 7.0% in April—below a FactSet consensus estimate of 6.3%. The core rate—which excludes volatile food and fuel prices—came in at 5.3%, which was also an improvement from the prior month and below expectations.

European Central Bank (ECB) President Christine Lagarde reiterated in a speech that inflation was still too high and “it is set to remain so for too long." She added: "That is why we have hiked rates at our fastest pace ever—and we have made clear that we still have ground to cover to bring interest rates to sufficiently restrictive levels." The minutes of the ECB’s May meeting showed most policymakers voted to slow the pace of rate increases to a quarter point but signaled an appetite to tighten monetary policy further.

Eurozone confidence falls to six-month low

A European Commission survey showed that economic sentiment weakened more than expected, with this indicator slipping to 96.5 in May—its lowest level since November 2022. A stagnating economy, elevated inflation, and rising interest rates weighed on morale. Sentiment deteriorated among manufacturers, service providers, retailers, and constructors. However, consumers were slightly less pessimistic, as households became more positive about their financial situation.

UK business optimism dips; firms expect to slow wage, price rises

Business confidence in the UK retreated to its long-term average of 28% in May, after three months of rising optimism, according to a monthly sentiment index compiled by Lloyds Bank.

UK companies surveyed by the Bank of England in May indicated that they intend to raise output prices and wages over the coming year, although they expect the pace to slow relative to a month ago. They plan to raise prices by 5.1%, down from 5.9% in April’s survey. Expected pay increases clocked in at 5.2% compared with the 5.4% recorded in the prior month.


Amid continued strong foreign investor interest, Japanese equities rose over the week, with the Nikkei 225 Index rising 1.97% and the broader TOPIX Index up 1.72%. The indexes reached fresh 33-year highs, with the gains supported by strong domestic earnings and yen weakness. Sentiment was also aided by the passage of the U.S. debt ceiling bill and the avoidance of default, as well as some indications that the U.S. Federal Reserve could pause its interest rate hikes in June.

Against this backdrop, the yield on the 10-year Japanese government bond fell to 0.41% from 0.43% at the end of the previous week. Bank of Japan (BoJ) Governor Kazuo Ueda said it was premature for the central bank to discuss details of an exit from its ultra-easy monetary policy and that there was no set time frame for achieving its 2% inflation target, given uncertainty about the outlook for prices. He continued to emphasize the need for central banks to be more careful about how they communicate.

Authorities say they will respond appropriately to currency moves, boosting yen

The yen strengthened to about JPY 139 against the U.S. dollar from the prior week’s JPY 140.66. The Japanese currency had weakened to around a six-month low against the greenback in anticipation of continued monetary policy divergence between Japan and the U.S. This prompted Japan’s top financial authorities to meet and state that they will closely watch currency market moves and respond appropriately as needed, not ruling out any option available if necessary. The government and the BoJ will work even more closely together under the central bank’s new leadership in responding to risks in markets that may hurt Japan’s economy.

Signs of foreign tourism rebounding

According to preliminary data released by the Japan Tourism Agency, the country’s hotels and other accommodation facilities recorded over 10 million overnight stays by foreigners in April for the first time since the outbreak of the coronavirus pandemic three years ago. Inbound tourism was buoyed by the weak yen, an increase in international air traffic, and the start of Japan’s cherry blossom season. Expectations are high that tourism will rebound further following the lifting of Japan’s COVID border controls for all arrivals on April 29.


Chinese equities rose after the U.S. Senate passed legislation to suspend the debt ceiling, removing the risk of a destabilizing U.S. default and reviving investors’ risk appetite. The Shanghai Stock Exchange Index gained 0.55%, while the blue chip CSI 300 added 0.28% in local currency terms. In Hong Kong, the benchmark Hang Seng Index rose 1.1% after hitting a six-month low earlier in the week, according to Reuters.

China’s official manufacturing Purchasing Managers’ Index (PMI) fell to a below-forecast 48.8 in May from April’s 49.2, marking the second consecutive month of contraction and the lowest reading since December 2022. A reading above 50 represents an expansion from the previous month. Production activity fell into contraction for the first time since January, dragged down by declines in new orders and exports. The nonmanufacturing PMI also eased, falling to a weaker-than-expected 54.5 in May from 56.4 in April. The sector continued to grow but at the slowest pace since China lifted pandemic restrictions in December. Separately, the private Caixin/S&P Global survey of manufacturing activity unexpectedly rose to 50.9 in May from April’s 49.5 as output and new orders rose at the highest level in almost a year.

Industrial profits fell 20.6% in the first four months of the year from the prior-year period, according to the National Bureau of Statistics, slightly narrower than the 21.4% decline recorded in the first quarter amid waning domestic and external demand. 

Property sector growth loses momentum

New home sales by China’s top 100 developers rose 6.7% in May from a year earlier, down from gains of more than 29% in the previous two months. The latest data from the China Real Estate Information Corp. was further evidence of China’s flagging post-pandemic recovery even after the central and local governments rolled out an array of stimulus measures at the end of 2022 to bolster the country’s property sector.

Other Key Markets


On Sunday, May 28, according to preliminary results for the second round of the presidential election, the incumbent President Recep Tayyip Erdogan secured another term in office with a 52% to 48% victory over the six-party National Alliance candidate Kemal Kilicdaroglu. The official results should be published in early June, and Erdogan will be sworn in for another five-year term by June 10.

In the meantime, Erdogan will appoint new ministers—including replacements for cabinet ministers who were elected to parliament—and possibly a new central bank governor. However, T. Rowe Price sovereign analyst Peter Botoucharov does not believe changes in the government’s policy framework will occur until after a new government is in place.


On Wednesday, the Polish government provided its flash estimate of inflation in May. The Central Statistical Office of Poland reported that the consumer price index (CPI) increased 0.0% month over month and 13% year over year in May. Both readings were lower than expected.

T. Rowe Price credit analyst Ivan Morozov considers the latest inflation data to be dovish, particularly because the “core” inflation rate seems to have declined in year-over-year terms for the first time in several months. This could be the first sign that inflationary pressures in Poland are peaking.

Nevertheless, Morozov still believes that a combination of loose monetary and loose fiscal policies will delay the convergence of inflation to the central bank’s inflation target, which is 2.5% plus or minus medium-term variances of up to one percentage point. He believes that the convergence may not occur until 2025, but possibly later.




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