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US economic growth revised downward

A downward revision to US gross domestic product (GDP) in the first quarter in addition to concerns about higher interest rates for longer put pressure on Wall Street on Thursday. But the negative sentiment couldn’t spill over to Asia as a heavy flow of macroeconomic data kept stock markets in the region in positive territory on Friday.

Shane Strowmatt, LGT
Reading time
5 minutes
US economy
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The growth rate of US GDP in the first quarter was revised downward to 1.3% on the year, according to figures released on Thursday. That is down from the 1.6% advance estimate and much slower than the previous quarter’s 3.4%. Adjustments to consumer spending mostly accounted for the downward revision. First-quarter inflation was also adjusted down slightly to 3.3% from a previous estimate of 3.4%. While weaker economic growth and slower inflation are both arguments in favour of rate cuts by the Federal Reserve (Fed), the inflation figure is still much higher than the Fed’s 2% target.

In New York, the major stock indices traded clearly in the red on Thursday. Salesforce dragged down sentiment on the broader market after the enterprise software company projected the lowest quarterly revenue growth in the firm’s nearly 20-year history as a listed company. Salesforce stock plummeted almost 20%. The Dow Jones Industrial fell 0.8% and the S&P 500 lost 0.6%. The Nasdaq-100 closed 1.1% lower on Thursday. On Friday, the release of Personal Consumption Expenditures (PCE) data - the Federal Reserve's preferred gauge of inflation - could swing market sentiment in either direction rapidly by shifting traders’ expectations for future rate cuts.

On Thursday, a court in New York found Donald Trump guilt of falsifying documents, the first time a former US president has ever been convicted of a crime. The immediate effect on markets was limited, however, as Trump has not yet been sentenced and even if sentenced to time in prison, he would still be able to run for president.

Sentiment on stock markets in Asia was clearly better on Friday, supported by a string of macroeconomic data. In Japan, industrial production slipped 0.1% when compared with the previous month in April, while inflation in Tokyo - which is considered an indication of national inflation - was up 1.9% on the year in May, mostly due to higher electricity prices. The Nikkei 225 was trading up 1.1% on Friday. Industrial production in South Korea came in far ahead of estimates, increasing 2.2% in April when adjusted for seasonal factors and compared to the previous month. The Kospi was up 0.2%. In China, manufacturing activity slumped unexpectedly in May. The official Manufacturing Purchasing Managers Index (PMI) fell to 49.5 in May from last month’s 50.4 level. A level below 50 suggests contraction. Hong Kong's Hang Seng Index was trading 0.7% higher, while the Shanghai Composite gained 0.1%. Australia’s S&P/ASX 200 was up 0.6%.

In Switzerland, GDP data released on Thursday showed the economy grew slightly faster than initially expected in the first quarter. GDP increased 0.3% when compared to the last quarter of 2023. That’s slightly faster than the government’s original 0.2% estimate and roughly in line with expectations. The Swiss franc strengthen versus both the US dollar and euro on Thursday. Switzerland’s SMI stock index closed 0.7% higher on Thursday.

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

Economic data in focus: German retail sales, Swiss retail sales, euro-area consumer prices, US Personal Consumption Expenditures, Canadian gross domestic product.


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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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