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Markets and macro insights with Sebastian Orsi, CFA, Senior Research Analyst
What were the key data releases last week and how did markets react?
- Last week was a relatively slow news week, with a mid-week holiday in the US. Global equities were up about 0.6% for the week (local currency terms), with Europe (+0.8%) leading after the prior week’s decline. Europe relinquished about half its weekly gain after the weak PMI data was released on Friday morning. The S&P 500 was up +0.6% even as the IT sector declined. Cyclical sectors led the market, i.e. Financials, Energy and Consumer Discretionary. Meanwhile, IT, Utilities and Real Estate were the weakest.
- Bond yields increased a few basis points in the US (2-year +0.04%, 10-year +0.05%). European yields had increased a bit more but came back closer to flat after the weak European Purchasing Manager Index (PMI) figures. French yield spreads widened initially but tightened again to close the week.
- US retail sales were mixed. Headline retail sales were only up 0.1% month-on-month in May, compared to expectations for 0.3% and there was -0.2% revision to April’s figures. A lot of the weakness came from autos, fuel and home furnishings, which wasn’t surprising. Excluding these and some other more volatile items, control group sales were up 0.4% month-on-month.
- US industrial production was better than expected, up 0.9% month-on-month, with a similar uptick within manufacturing and relatively broad strength. It will be interesting to see the next ISM manufacturing report; the last report was somewhat soft, despite a good PMI figure, so with the uptick of the hard data, will the survey data follow?
- June PMIs were published at the end of the week. European manufacturing weakened further while services were showing growth, but less than anticipated. US PMIs were stronger than anticipated and indicated improving growth in manufacturing.
The US services PMI had a strong move up last month and was stronger again in June.
The week ahead: what to watch out for
This week, the key data points are mainly survey data on business and consumer confidence in Europe and the US, as well as US Personal Income and Expenditure data for May. With that we’ll get the Fed’s preferred inflation indicator, the PCE deflator on Friday. Given that several of the inputs have been released, expectations are for a continuing downtrend.
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