LGT Navigator

Markets optimistic ahead of data-heavy week

Inflation data out of the US was roughly in line with market expectations to finish last week, cooling fears that a resurgence of inflation could push the Federal Reserve’s (Fed) rate-cutting path back even further. On Monday, markets in Asia were trading mostly in positive territory ahead of a week packed with macroeconomic releases and central bank monetary policy decisions.

Shane Strowmatt, LGT
Reading time
5 minutes
Inflation shown with icons

This week’s macroeconomic releases kick off with a series of Manufacturing Purchasing Managers’ Indices (PMI) from several countries throughout the day, culminating in US ISM Manufacturing PMI late Monday. Tuesday, the Swiss Consumer Price Index and German unemployment data are due. Midweek traders will sift through a series of Services PMIs for a better picture of where the world’s major economies are headed. The next round of central bank monetary policy decisions will also be announced starting with the Bank of Canada (BoC) on Wednesday, the European Central Bank (ECB) on Thursday and the Bank of Russia on Friday. To round out the week, the state of global trade will become clearer when two of the world’s largest exporters - China and Germany - reveal trade balance data. Also on Friday, the euro area releases gross domestic product and both the US and Canada publish labour market data.

In the Asia-Pacific region, stock markets started the week strong, lifted by positive PMI data. In China, the Caixin Manufacturing Purchasing Managers’ Index (PMI) increased to 51.7 in May after the official Manufacturing PMI released last week slipped to 49.5 points. A level below 50 suggests contraction. Hong Kong's Hang Seng Index was trading up 2.3%, while the Shanghai Composite lost 0.4%. In Tokyo, the Nikkei 225 gained 1.2% after the manufacturing activity in Japan expanded for the first time in a year. Japanese Manufacturing PMI came in at 50.4 for May, up from 49.6 in April. South Korea’s Kospi also shot up 1.8% after its Manufacturing PMI reading hit 51.6, its highest level in two years. In Australia, the S&P/ASX 200 was trading 0.7% higher.

Personal Consumption Expenditures (PCE) - the Federal Reserve’s preferred gauge of US inflation, which were released on Friday - increased 0.3% in April when compared to the previous month or 2.7% when compared with the same month last year. Core PCE - which strips out volatile food and energy prices - was up 0.2% in April on the month and 2.8% versus a year ago. The figures were roughly in line with market expectations but remain above the Fed’s target of 2% inflation.

In New York, stock indices finished the week strong. The Dow Jones Industrial gained 1.5% and the S&P 500 finished the day up 0.8%. The Nasdaq-100 closed essentially flat on Friday.

Meanwhile, Canadian gross domestic product grew 1.7% in the first quarter, much lower than both market expectations and the BoC’s own projection of 2.8%. The figure released Friday came just one day after the growth rate of US GDP in the first quarter was revised downward to 1.3% on the year.

Inflation in the euro area came in higher than markets had expected with prices increasing at 2.6% in May when compared with the same month a year earlier. That pace was slightly faster than April’s 2.4% inflation. Core inflation - which strips out energy, food, alcohol and tobacco prices - was up 2.9% in May from 2.7% in April. Despite the hotter-than-anticipated inflation, markets continued to expect the ECB to cut rates begging at Thursday’s monetary policy announcement, but a resurgence of inflation could influence the pace of further rate cuts.

Energy markets were steady on Monday after the OPEC+ group of oil-exporting nations agreed at the weekend to extend output cuts until the end of next year. The group plans to extend cuts of 3.66 million barrels per day by a full year until the end of 2025 and also extend another set of cuts of 2.2 million barrels per day until September 2024 before reducing those cuts over the course of the following year. Brent futures were trading just below USD 81 and West Texas Intermediate was trading below USD 77 per barrel.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: Turkish Consumer Price Index, Manufacturing Purchasing Managers’ Indices from several countries throughout the day, including Spain, Italy, Germany and Canada. US ISM Manufacturing PMI.


LGT helps you make informed investment decisions

Global economic and market trends at a glance

You can also follow us on Facebook or LinkedIn – or visit Insights and discover interesting background articles. If you have questions, a consultant from the bank will be happy to help you.

Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

Contact us