Global markets show resilience and a wide range of dynamics as we move into the summer of 2023. The European Central Bank (ECB) has indicated its intention to continue raising rates until the end of the summer, causing a shift in focus to the implications for various financial sectors.
On the other side of the Atlantic, the Dow Jones Index closed 1.21% higher, while the S&P500 Index ended up by 0.99%. The NASDAQ Technology Index also saw a 0.63% increase. These gains came on the back of encouraging private sector employment data from the US, suggesting a growth of 278,000 jobs, a figure that surpassed expectations. Despite the growth in employment, wage growth appears to be slowing, a trend that may encourage the Federal Reserve to maintain its policy of gradually raising rates.
However, the Federal Reserve Bank of Philadelphia’s President, Patrick Harker, has hinted at a possible pause in this trend. He suggested that the US Central Bank is close to a point where it might stop raising interest rates and instead hold them at current levels, a move aimed at further curbing inflation. This view posits a halt to rate increases in the upcoming June meeting, although a return to rate hikes in later meetings is not ruled out.
In Europe, the majority of stock markets closed higher. The German DAX saw a 1.21% gain, the French CAC 40 added 0.55%, the Spanish IBEX 35 increased by 1.54%, while the British FTSE 100 ended up 0.59% on the day. The ECB’s latest monetary policy report shows a central bank concerned with the risk of rising inflation. Despite the slowdown in inflationary pressure, the ECB maintains that future rate hikes are necessary, aiming to strike a balance between achieving target inflation levels and preventing undue harm to the economy.
Crude oil prices also saw a notable change, jumping more than 3%, an upturn that offsets the 7% losses experienced in the previous three trading days. This was largely in response to expectations of a production cut announcement from OPEC+ in its upcoming meeting, coupled with the anticipation of a weekly report on oil supply and demand from the US government.
Asian markets presented a varied picture, with Japan’s Nikkei 225 ending the day 0.84% higher and China’s FTSE China A50 adding 0.42%. The Hong Kong Hang Seng ended Thursday slightly down by 0.10%, while India’s NIFTY 50 saw a slight decrease of 0.25%. In contrast, Australia’s S&P/ASX 200 ended the day with a 0.27% gain. The overall positive trend in most Asian stock markets on Friday was driven by optimism following the approval of a deal to raise the US debt ceiling, which averts a default. This was coupled with renewed hopes for economic recovery in China, which has seen its markets rebound from six-month lows.
Key market figures on closing:
| Index | Closing Value | Change | Change (%) |
|---|---|---|---|
| S&P 500 (F) (US500) | 4,221.02 | +41.19 | +0.99% |
| Dow Jones (US30) | 33,061.57 | +153.30 | +0.47% |
| DAX (DE40) | 15,853.66 | +189.64 | +1.21% |
| FTSE 100 (UK100) | 7,490.27 | +44.13 | +0.59% |
| USD Index | 103.56 | -0.77 | -0.74% |
As the trading week concludes, the spotlight now shifts to the release of the Labor Department’s unemployment report for May (Nonfarm Payrolls). The
data, set to be released today, will play a significant role in determining the Federal Reserve’s stance on an aggressive rate hike. The general consensus is that a positive data release is likely to make a June rate hike more probable. The impact of such a decision on the financial markets would be a strengthening of the dollar, with a likely negative effect on indices and gold, and vice versa.
A new week brings new market dynamics and important events to watch out for. The release of the US Nonfarm Payrolls and Unemployment Rate data will be keenly observed by market participants for signs of economic health.
The global market landscape continues to evolve, with factors such as central bank decisions, inflation trends, job data, and oil price movements shaping the future direction. As we move deeper into 2023, investors and market observers alike will be keeping a close watch on these developments, seeking to decipher their implications and strategise accordingly.
