world markets weekly review

World Markets Weekly Review 31/05-04/06/2021


World markets moved sideways this week as investors continue to assess the implications of inflation pressures on monetary policy. Stronger than expected data from most regions may boost confidence in the economic comeback but inflation fears are looming putting a lid on further gains. Important central bank meetings in the US and EU are scheduled for mid-June. Till then this sideways action could persist.

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In a holiday-shortened week (markets were closed on Monday in observance of Memorial Day), U.S. stocks managed to finish with a second-straight weekly advance but trading volumes were generally light. Traders reacted to the Labor Department’s closely watched monthly jobs report which showed a solid acceleration in job growth. Non-farm payroll employment jumped by 559,000 jobs in May following April’s upwardly-adjusted increase of 278,000.

Still the report fell short of economist estimates. The Labor Department also said the unemployment rate declined to 5.8% from April’s 6.1% rate, compared to expectations of a decrease to 5.9%. The nonfarm payroll data was preceded by  a report showing record growth in service sector activity in the month of May. The Institute for Supply Management said its services PMI rose to 64.0 in May from 62.7 in April. Economists had expected the index to inch up to 63.0. Meanwhile, initial jobless claims continued to decelerate to pandemic lows and the Fed’s Beige Book showed economic activity accelerated. However, inflation pressures continue to fester.

In Latin America, Brazil’s Bovespa reached an all-time high during the week, supported in part by encouraging economic data. The Brazilian economy expanded 1% year-on-year in the first quarter of 2021, which was stronger than expected, after a 1.1% contraction in the previous period. It was the first expansion since the fourth quarter of 2019. Trade data were also strong and aided sentiment. Brazil’s trade surplus widened to $9.3 billion in May of 2021 from $6.9 billion in the corresponding month of the previous year. Exports surged 46.5% over a year earlier to $26.95 billion. In Mexico, the central bank released its quarterly inflation report. Policymakers now expect inflation to hit 4.8% this year while GDP growth is seen at 6.0%.


European equities rose as continued optimism about international economic recovery helped underpin sentiment. However, worries that central banks might pull-forward some tightening of extremely-loose monetary policies (due to rising inflation pressures) sooner than expected curbed stocks’ advance.
Inflation in the eurozone rose sharply in May to 2%, above the European Central Bank’s target of “below but close to 2%.”Prices were pushed higher by a very strong rise in energy prices from a year ago and put inflation at its highest level since October 2018. In other economic news, Eurostat data showed that Eurozone retail sales dropped more than expected in April. They fell by 3.1%, month-on-month, reversing most of a 3.3% increase from March. In the U.K. construction output growth accelerated more than expected in May according to Markit.


Japanese markers were mixed for the week with sentiment remaining weak as the government extended the coronavirus state of emergency in Tokyo, Osaka, and seven other prefectures till June 20.
The average of household spending in Japan rose an annual 13% in April, blowing away forecasts for an increase of 9.3% following the 6.2% gain in March. However, worries remain about the pace of Japan’s recovery, with separate data showing the services sector activity contracted for the 16th consecutive month in May due to Covid-19 restrictions. Adding to worries, the Organization for Economic Cooperation and Development upgraded its forecast for global economic growth this year to 5.8% but cut its projection for Japan  to 2.6% from the previous estimate of 2.7%.

In China, stocks retreated after recording three weeks of gains. Last month, overseas investors bought $8.7 billion of Chinese equities, the highest single month this year, according to Reuters. On the banking front, the China Banking and Insurance Regulatory Commission (CBIRC) warned small banks against chasing property sector loans as bigger banks reduced their lending to the sector and the Reserve Bank of India (RBI) left its benchmark repo rate at 4%. The bank also announced additional bond purchases.

In Australia, the ASX 200 recorded a weekly rise of 1.6%, its third straight weekly gain. The local market briefly touched 7300 for the first time in history and added about A$46 billion since Tuesday’s close.


In Nigeria, the local stock exchange closed bullish at the end of Friday’s trading session, posting a profit. According to analysts at InvestData Consulting sector rotation will continue in June. “The trading pattern we saw in the previous month may continue, given that many companies have June as mark-down and payment dates, end of the quarter for fund managers window dressing, and repositioning of portfolios ahead of Q2 numbers and others.”

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