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US inflation data pushes stock markets to historic first half of year

Inflation data coming out of the US supported equity markets at the end of last week. The rate of price increases continued to slow in the world’s largest economy, calming investors who were worried that inflation may pick back up. In 2023, some indices were able to record their largest gains for the first half of the year in multiple decades.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
© Shutterstock

The Personal Consumption Expenditures (PCE) Price Index fell in May to 3.8% from 4.3% in the previous month. Core PCE - which strips out food and energy prices and is closely watched by the US Federal Reserve as a measure of inflation - also came down to 4.6% from 4.7% in the previous month. April’s values had caused markets a headache as both headline and core PCE had slightly increased, but May’s reading shows there is no reaccelerating trend in inflation for the time being.

In New York, stock markets reacted positively to the decelerating inflation data. The Nasdaq-100 rose 1.6% to close at 15,179.21 points for a total gain of nearly 39% in the first half of the year. That makes the first half of 2023 the best on record for the tech-heavy index. Tech stocks have been one of the major winners of the narrative that the Fed could end its rate hiking cycle soon. The Dow Jones Industrial gained 0.84% to close the week at 34,407.60 points and the S&P 500 was up 1.23% at 4,450.38 points.

In individual stocks, Apple finished Friday’s session with a market capitalization more than 3 trillion US dollars, the only company to ever have shares valued that highly. Shares in Pfizer gained 1.55% after the European Commission reached a deal with the US company and several European firms to keep capacity available to product hundreds of millions of vaccines per year in the future. US chipmaker stocks gained Friday after the Dutch government imposed restrictions on exports of semiconductor equipment, which was seen as a move to limit China’s access to key technology. On Friday, Nvidia gained 3.6%, Intel was up 1.6% and AMD jumped 2.4%. Shares of ASML, a Dutch company supplying equipment for chipmakers, dropped 0.8%.

Stock markets in the Asia-Pacific region kicked off this week on the positive note. Hong Kong’s Hang Seng Index was trading up 1.7% and Shanghai Composite increased 1.2% after China’s Purchasing Managers’ Index (PMI) slightly beat expectations, coming in at 50.5 points. Japan’s Nikkei 225 was also up 1.7% on Monday and South Korea’s Kospi jumped 1.3%.

Wrapping up macroeconomic from last week, inflation in the eurozone continued to fall in June, mostly due to decreasing energy prices. Inflation in the euro area dropped to 5.5% year-on-year from 6.1% last month. Only prices in the bloc’s largest economy, Germany, ticked up during June. Despite the falling inflation figures, the European Central Bank is expected to hike rates for a ninth and tenth consecutive time in July and September.

Adding to the gloomy outlook in Germany were unemployment figures which came out Friday. The German Labour Office said the number of unemployed people rose by 28,000 in June to 2.61 million. The adjusted unemployment rate was 5.7%, up from 5.6%.

Switzerland’s KOF Economic Barometer came in at 90.8 points for June (down 0.6 points from May), signalling that the outlook for the Swiss economy is gloomy in the second half of 2023. The barometer, a composite indicator for the strength of the Swiss economy, has now fallen for three consecutive months.

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

Economic data in focus: Manufacturing Purchasing Managers’ Index from various countries throughout the day, Swiss Consumer Price Index (08:30 CET).

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

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