Fresh Covid-19 related restrictions began to loom on world markets this week. Investors remained in risk-off mode in Asia while U.S. indices had a good week as stronger than expected job growth painted a positive picture of the gradually reopening economy.
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AMERICAS
Wall Street had a strong week. Both the S&P 500 and the NASDAQ added to their record highs set the previous week. June was the fifth positive month in a row for the S&P 500, which posted a total return of 2.3%.The index also posted a 15.3% return through the first six months of this year with all 11 sectors positive. Its performance was driven by the economic reopening, rising corporate earnings and policy support. The Conference Board’s consumer confidence index for June hit 127.3, a high not seen since Covid-19 struck and higher than the 119 expected. The economy generated 850,000 new jobs in June, exceeding most economists’ expectations for around 700,000 and the most since last August. However, 3.4 million people are still missing from the labor force. Meanwhile, the unemployment rate rose to 5.9% from May’s 5.8% rate, compared to expectations of a decrease to 5.6% .
LATAM
In Brazil, equities were fairly flat this week as the second part of the tax reform was presented to Congress. The bill proposes to tax at 20% the profits and dividends that companies distribute to shareholders.According to the latest EXAME/IDEIA survey, almost half of Brazilians surveyed – 45% – are against the proposal. In other news, the country’s electricity regulator announced a 50% increase in a tariff surcharge starting in July. On the banking front, bank loans continued to accelerate in May to 16% YoY, vs 15% in April. Brazil’s weekly consumer price index increases in 5 of 7 capitals at end of June Fundação Getulio Vargas (FGV) said in a report.
In Chile, the market was little changed for the week. The ministry of finance announced it would increase its sales of dollar-denominated assets from Chile’s sovereign wealth fund to help finance the USD 10.8 billion fiscal package announced at the end of May to aid the economic recovery.
The news helped the peso strength against the U.S. dollar.
ASIA/PACIFIC
Japanese stocks fell for the week, as uncertainty over the state of the country’s economy cast a shadow. May’s unemployment rate rose to 3.0%, the highest level since December 2020. Industrial production dropped 5.9% in May, m-o-m, amid expectations of a 2.1% decline. Meanwhile, the large manufacturers’ sentiment index rose to +14 in the second quarter from +5 in the prior quarter, according to the Tankan survey. The expected level was 15. The au Jibun Bank manufacturing Purchasing Managers’ Index fell to 52.4 last month, from 53.0 in May. In currency markets, the yen weakened to its lowest level since February 2020.
China’s stock market returns were negative for the week. Both the Shanghai Composite Index and large-cap CSI 300 Index recorded their biggest one-day percentage drop since early March on Friday, according to Reuters. In IPO news, Chinese ride hailing company Didi debuted on Wall Street, raising $4.4 billion on Wednesday. It was valued at $68bn after its first day of trading on NYSE, making it the biggest IPO haul for a Chinese company since Alibaba Group listed in 2014.
In Australia, the ASX 200 finished a tumultuous week flat. The benchmark index did cap its strongest financial year in decades – increasing by an impressive 24% in the 12 months to Wednesday – but Sydney’s ongoing lockdown helped subdued the mood. Tech stocks were worst performers. It was a week to forget for utilities and property names as well. In politics, the government announced a four-phase reopening scheme for the nation.
EUROPE
European equities closed out the first half with strong returns but were down slightly for the week.
Travel restrictions in several countries continued to weigh and Portugal re-imposed a nighttime curfew in 45 municipalities. The mood also turned cautious amid worries that inflationary pressures might bring forward interest rate increases. Annual inflation rate in the eurozone eased to 1.9% in June from a 2-1/2-year high of 2% in May. Inflation in June is near the ECB’s target of “below but close to 2.0%” but it is likely to peak above 2.5% towards the end of the year. Meanwhile, eurozone’s unemployment rate stood at 7.9% in May from 8.1% in April, Eurostat data showed. Among the largest eurozone’s economies, the highest unemployment rates were recorded in Spain (15.3%), Italy (10.5%) and France (7.5%), while the lowest rates were recorded in the Netherlands (3.3%) and Germany (3.7%). Eurozone’s industrial producer prices were up 9.6% in May year-on-year, following a 7.6% rise in April.
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