S&P 500 breaks string of declines

Every sector in the S&P 500 advanced appearing to reflect optimism that inflationary pressures may be moderating.

European equities also rose to the highest level in three weeks as confidence grew that inflation may be peaking and as central banks signalled that interest rate increases are likely to be gradual.

The minutes from the May meeting of the Federal Open Market Committee were released this week; the major takeaway from the minutes is that a second consecutive 50 bps hike in June looks increasingly likely.

Initial data from the S&P Global Flash US PMI receded to 57.5 in May, down from 59.2 in April (PMI readings greater than 50 indicate an expansion in activity.) Final global PMI and ISM releases for May will be eagerly awaited in the coming week providing an important steer to investor sentiment.

The first week of June also brings US labour market report on Friday, a key economic indicator. Core eurozone bond yields fluctuated on mixed reports but ended slighter higher this week.

Yields initially ticked up after European Central Bank (ECB) President Christine Lagarde advocated a gradual approach to monetary tightening. Yields retreated somewhat as the Eurozone PMIs reported a mild decline, suggesting a modest loss of momentum.

Equities

Global stocks were up last week by 3.3% in euro terms and 3.7% in local terms. Year-to-date global markets are down -7.2% in euro terms and -12.6% in local terms. The US market, the largest in the world, was up 4.3% in euro terms and 4.7% in local terms.

Fixed Income & FX

The US 10-year yield finished at 2.74% last week. The German equivalent finished at 1.04%. The Irish 10-year bond yield finished at 1.63%. The Euro/US Dollar exchange rate finished at 1.08, whilst Euro/GBP finished at 0.85.

Commodities

Oil finished the week at $115 per barrel and is up 62.5% year-to-date in euro terms. Gold finished the week at $1,858 per troy ounce and is up 7.3% year to-date in euro terms. Copper finished the week at $9454 per tonne.

The week ahead

Tuesday 31st May

Eurozone Consumer Price Index data is published

Wednesday 1^st June

ISM Manufacturing and Services data for May is released

Friday 3^rd June

US Non Farm Payroll report for May is published