Leading share indices increased this week despite growth forecasts being revised lower across the world, hot inflation, central banks’ unstoppable path to monetary tightening, the ongoing conflict in Ukraine and the EU’s fresh sanctions against Russia.
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The Canadian market generated positive returns for the week. The benchmark S&P/TSX Composite Index climbed 0.20%. On the economic front, data from Statistics Canada showed labour productivity in the country declined by 0.5% in the first quarter of 2022, easing from an upwardly revised 0.6% fall in the previous quarter.
In a holiday-shortened week, the major U.S. stock indices each slipped about 1%as JPMorgan Chase chief Jamie Dimon warned that an economic “hurricane” was coming because of tighter monetary policy, inflation and the war in Ukraine. A report that Tesla CEO Elon Musk had emailed fellow executives that the electric car maker might have to lay off 10% of its workforce—and that he had a “super bad feeling” about the global economy—also seemed to unnerve investors who continued to question whether the Federal Reserve will be able to rein in inflation without causing a recession.
Fed Vice Chair Lael Brainard remarked on Thursday that financial conditions had already tightened considerably and ruled out any pause in rate hikes over the summer. Friday’s US labour market report was a solid one, with job gains continuing at a solid pace, unemployment remaining low.
In Brazil, stocks as measured by the BOVESPA index returned -1%. On the macro front, the country’s unemployment rate fell to 10.5% in the three-months up to April, its lowest level since 2015, driven by the agricultural and construction sectors. In Colombia, assets rallied following the first round of the Presidential run off which surprised the market after Rodolfo Hermandez finished ahead of Federico Gutierrez to face Gustavo Petro. Petro and Hernandez will face off in the second round of the election on June 19.
Japanese stocks gained as investors turned risk-on. The government’s recent decision to ease border restrictions, effective June 1 2022 supported sentiment. The final au Jibun Bank Japan Services Purchasing Managers’ Index (PMI) rose to a seasonally adjusted 52.6 in May from the prior month’s final of 50.7. “Activity over the coming months looks set to be strong, as the levels of outstanding business rose at the sharpest rate since September 2019,” said Usamah Bhatti, economist at S&P Global Market Intelligence, which compiles the survey. On the monetary policy front, BoJ Deputy Governor Masazumi Wakatabe said that his greater concern for Japan, “at least for the present, is still continued low growth, low interest rates, and low inflation — a situation that has come to be called “Japanification.”
Chinese equities rallied in a holiday-shortened week on easing lockdowns. On Friday markets were closed for the the Dragon Boat Festival. The government unveiled a raft of support measures to cushion an economic slowdown triggered by COVID-19 restrictions. An additional RMB10bn in agricultural subsidies will be issued to grain growers who are bearing the cost of rising agricultural materials. Beijing will also provide support to coal and renewable energy sources to increase production. Meanwhile, China’s factory activity showed a slight improvement in May. Manufacturing PMI was stronger than expected, up from 47.4 in April to 49.6, while the non-manufacturing index rose to 47.8 in May from 41.9 in April.
The Australian stock market was higher for a third straight week. The benchmark S&P/ASX 200 Index gained 0.78% with the energy sector being the best performer. OPEC+ agreed on Thursday to ramp up output in July by 50 percent more than in previous months. In economic news, the services sector in Australia continued to expand in May, the latest survey from S&P Global revealed. The services PMI was 53.2 in May down from 56.1 in April, although it remains above the boom-or-bust line of 50. This marked the fourth consecutive month in which business activity in the Australia service sector rose. The survey also showed that the composite index fell to 52.9 in May from 55.9 in April.
European stock indices ended the period in negative territory. The pan-European STOXX Europe 600 Index ended the week 0.87% lower. Investors continued to struggle with concerns about high inflation, slowing economic growth, the pace of central bank policy tightening, and the war in Ukraine. Inflation in the 19 countries comprising the euro area stood at a record 8.1% in May, up from 7.4% in April according to a flash estimate from Eurostat. Energy had the highest annual rate in May (39.2%, compared with 37.5% in April), followed by food, alcohol & tobacco, non-energy industrial goods and services.
In Poland, the WIG20 rose 0.51% while in Hungary, the BUX jumped 6.88%. The EU Commission approved billions of euros in recovery funds for Poland on Wednesday, while a similar deal for Budapest was still pending. Hungary’s EU affairs minister said on Friday that the country hopes to reach an agreement with EU authorities by the end of the year on gaining access to the pandemic recovery funding.
REST OF EUROPE
In the UK, the FTSE 100 was off 0.69% for the holiday-shortened week amid the Queen’s Platinum Jubilee celebrations. In Switzerland, the SMI was down 1.01%. Russia’s Trading System Index soared by 5.79%.
(Note: Trading between 29/05- 01/06/2022)
In Israel, trading in the Tel Aviv Stock Exchange (TASE) was marked by price increases in the leading share indices. The TA-35 increased by 1.2%.The Bank of Israel announced that the Composite State of the Economy Index for the month of April 2022 rose by 0.2%, following a rise of 0.1% in each of the months January-March 2022.
In Saudi Arabia, the TASI advanced 0.60%.
In South Africa, the JSE Top 40 added 0.68%.
Nigeria’s stock market posted losses of 2.18% for the week amid intense profit-taking from stocks already trading at an all-time high, the central bank’s increase of the Monetary Policy Rate to 13%-the first hike in more than two years- and the increase in yields seen in the treasury and bond market. The performance saw approximately N634.5 billion removed from the market.
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Kyriaki Balkoudi is a markets editor for World Markets Daily. She has a bachelor’s degree in Balkans Studies from Aristotle University of Thessaloniki, Greece and a master’s degree in International Politics from City University London, UK.
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“Weekly market wrap”. Edward Jones. June 03, 2022
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