World markets were mixed in a week full of reports. A healthy dose of caution and skepticism made traders reluctant to make significant moves ahead of the Federal Reserve’s monetary policy meeting scheduled for next week (June 16). A lot of concerns prevail in this era of growing uncertainties.
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AMERICAS
US equities finished mixed in a week of relatively light summer trading. The S&P 500 hit a new record high and the Nasdaq registered a solid weekly advance while the Dow Jones Industrial Average recorded a modest loss. Hotter-than-expected data did not seem to dominate sentiment. Inflation as measured by the consumer price index (CPI) reached a 13-year high of 5.0% in May, or above expectations while the core index, which excludes food and energy, rose 3.8%, the largest 12-month increase since 1992. Investors shrugged off the jump in inflation betting the spike would be temporary and the Federal Reserve will maintain its ultra-loose monetary policy for some time. They also focused on policy developments. A bipartisan group in the Senate reached a deal on an infrastructure plan that would not raise corporate taxes. Of note, the G7 announced a minimum corporation tax level of 15% for multinationals.
LATAM
In Mexico, financial assets seem to have responded favorably to the results from Sunday’s midterm elections. Preliminary results showed that President Andrés Manuel López Obrador’s Morena coalition had lost its supermajority in the lower house but maintained majorities in each chamber of congress.
In Brazil, during the week, the government reported that annual inflation rate climbed to 8.06% in May of 2021, the highest since September of 2016, and beating market expectations of 7.93%. On a monthly basis, consumer prices went up 0.83%, faster than forecasts of a 0.71% rise. Bank of America’s strategy team raised recommendation for Brazilian stocks from neutral to to buy. On the other hand, the team remains more cautious with riskier sectors such as services, airlines and shopping malls.
ASIA/PACIFIC
In Japan, stock market returns were broadly unchanged for the week as investors remained cautious amid lingering worries about the pace of the domestic economic recovery. The economy shrank 3.9% in the first quarter, slightly better than the initial estimate of a 5.1% contraction, the Cabinet Office reported.
In a separate release, data compiled by the Ministry of Finance and the Cabinet Office showed
the quarterly business sentiment index for large Japanese manufacturers showed a worsening for the second straight quarter.
The Bank of Japan (BoJ) didn’t buy any exchange-traded funds for an entire month of May, the first time since Haruhiko Kuroda became the central bank’s governor in 2013 and kicked off his easing campaign back then.
Chinese equities fell for a second week in a row. China’s producer prices rose by 9.0% year-on-year in May 2021, accelerating from a 6.8% gain in the prior month due to higher commodity prices. This was the fifth straight month of increase in factory gate prices and the steepest pace since September 2008, raising worries that rising factory gate inflation in China would contribute to inflationary pressures globally. Meanwhile, Chinese data showed the country’s broader credit growth slowed in May.
In India, the central bank kept rates unchanged and announced additional bond purchases, saying it was maintaining an accommodative monetary policy stance as long as necessary to support the economic recovery.
In Australia, the ASX gained 0.2% for the week, a fourth straight week of gains. The miners proved a source of strength on Friday, helping offset another decline for the major banks, which had lagged the market all week. In New Zealand, the manufacturing sector expanded at a faster pace in May, the latest survey from BusinessNZ revealed.
EUROPE
Europe closed out the week with gains for a fourth consecutive week, as more and more economies are reopening. The Sentix investor confidence for Eurozone climbed to 28.1, a 3-year record, from 21.0 in May. The European Central Bank kept its monetary policy stance unchanged and committed to continue its bond buying program at the current pace for another quarter. Industrial production in Germany unexpectedly fell 1% month-over-month in April, compared to market forecasts of a 0.5% rise.
AFRICA
In Nigeria, the stock market closed the week on a bullish note. Investors in Nigerian equities gained about N224 billion during the week. Nigeria’s blue-chip stocks also referred to as NSE 30 stocks have collectively posted yearly gains of about 46%.
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