The Fed’s revived bets to raise interest rates stemming from an upbeat May Non-Farm Payroll report lifted US bond yields and risk appetite early on, before sentiment changed this way and that throughout the volatile week.
Are you ready to hear what happened this week? Better check out these market moving headlines first!
Notable economic news and updates:
🟢 Extensive arguments about market risk
Saudi Arabia announced a voluntary addition to production cuts of 1 million barrels per day after the OPEC + meeting at the end of the week, while other voluntary cuts that end in 2023 will be extended until the end of 2024.
The Caixin Services PMI in China improved from 56.4 to 57.1 in May (vs 55.2 expected) and suggested a continued recovery after the close.
The World Bank raised its global growth forecast from 1.7% to 2.1% for the year but lowered its 2024 forecast from 2.7% to 2.4%.
China’s largest state bank has cut deposit rates, which should help pave the way for the People’s Bank of China (PBoC) to cut other interest rates.
Extensive arguments for deflecting market risk
The US ISM Services PMI for May fell below estimates at 50.3 versus 51.9 in April, with the price component declining 3.4 points to 56.2; Eurozone HCOB Services PMI for May: 55.1 vs. 56.2 in April
The SEC accused Binance, the world’s largest digital asset exchange, of mismanaging funds and lying to regulators; The SEC has sued cryptocurrency exchange Coinbase for acting as an unregistered broker, a day after it sued Binance.
“There is no clear evidence that core inflation has peaked,” European Central Bank President Lagarde said on Monday, hinting at further tightening.
The Reserve Bank of Australia surprised the markets by raising interest rates by 25 basis points to 4.10%, it says.Further tightening of monetary policy may be required“
“There is no clear evidence that core inflation has peaked,” says ECB President Lagarde, hinting at further tightening.
The Bank of Canada also surprised by raising interest rates by 25 basis points and kept the door open for further tightening as inflation remains stubborn.
China’s trade surplus narrowed from $90.2 billion to $65.8 billion in May, as exports fell 7.5% while imports fell 4.5% year-on-year.
Weekly global market summary
Dollar, Gold, S&P 500, Bitcoin, Oil, US 10-Year Yield Overlay Planned by TV
Traders started the week on a bullish note on the dollar and oil, thanks to another win on the non-farm payrolls, resolution of the debt ceiling crisis, and OPEC+’s surprise announcement of voluntary cuts.
Moreover, rumors that Chinese regulators were looking to provide support to the country’s shaky housing sector lifted the market mood, particularly in Asia.
Not only have these developments impacted global equities in positive territory, but they have also boosted Treasury yields on stronger Fed rate hike bets. WTI Crude Oil gapped higher to test the $74 per barrel resistance on Monday.
However, US bond yields were quick to regain gains the next day, when the ISM services PMI was lower than estimates and even highlighted a sharp drop in price levels.
Equities rose slightly in the middle of the week, as focus shifted to a more bullish rate decision from the RBA. This was followed by a similarly hawkish announcement from the Bank of Canada, which also showed a surprise rate hike of 0.25%.
Outside of commodity currencies, risky assets struggled to stay afloat when China printed a downbeat trade report. As it turns out, exports fell 7.5% year-on-year while imports fell 1.5% in May, reminding market watchers of the short-lived economic recovery.
Even bitcoin and other cryptocurrencies have lost their footing, but this is mostly due to US regulators suing major exchanges like Binance and Coinbase for allegedly misleading investors. Not even Apple’s unveiling of the Vision Pro was enough to boost risk appetite at the time.
Although crude oil was able to squeeze some gains thanks to API and EIA data reflecting stronger-than-expected demand conditions, stocks resumed their decline on Thursday. The slide away from risk sentiment accelerated during Thursday’s US session, linked to a weaker-than-expected US weekly jobless claims.
The reading came in at 261K New Claims, well above expectations of 235K, which has likely prompted traders to raise their bets on a recession (as well as lower odds of a Fed rate hike), marked by a large drop in bond yields, and the US dollar against the US dollar. . The price of bonds and gold rose.
Volatility subsided a bit on Friday with few major catalysts being released, but risk sentiment seemed to be broadly positive, especially for US stocks thanks to news of Tesla/GM lifting the US tech sector, but also linked to confirmed headlines out of China. . Major banks there will cut deposit rates to help stimulate economic activity.
Friday’s performance was mixed as we saw equities hold gains in the Asian trading session, bond yields remained in the green despite bond prices rallying in the US session, and the US dollar index rose steadily during the session, which could put pressure on commodities and cryptocurrencies on holiday. weekend. .
