US stocks continued to rally on Friday. The three major indices posted weekly gains, with the Dow Jones ending an eight-week losing streak at +6.2% - the longest since 1932. The S&P 500 climbed +6.5% week-over-week and the Nasdaq Composite gained +6.8% over the same period. The two indices thus ended a seven-week slide. The majority of the gains were recorded in the second half of the week. Better-than-expected earnings from the retail sector as well as the weakening of inflation ensured good sentiment. Despite the recent rally, stock markets have been clearly in the red since the beginning of the year.
In Asia, the markets have started the new week on a friendly note. In Tokyo, the Nikkei gains more than +2%. In Hong Kong, the Hang Seng climbs +1.9% and the Shanghai Composite advances +0.3%. The relaxation of the corona protection measures in the metropolises of Beijing and Shanghai, which were adopted over the weekend, are contributing to the good mood.
Today, Monday, US stock markets will be closed for a holiday.
Inflation in the US weakened slightly in April. Compared to the same month last year, consumer prices measured by the PCE index have increased by +6.3%, reported the U.S. Department of Commerce on Friday. In March, inflation was still at +6.6%. Core inflation, which excludes energy and food prices, was +4.9%, also lower than in the previous month (+5.3%). Nevertheless, consumers continue to expect high inflation. For the current year, they expect prices to rise by +5.3%. Consumer sentiment is correspondingly poor, having fallen in May to its lowest level since 2011 according to the latest surveys. The PCE index, which is based on consumer spending, is one of the key measures used by the Federal Reserve (Fed) to guide its monetary policy. Faced with high inflation, the Fed has begun to raise key interest rates this year.
The European Central Bank (ECB) is preparing financial markets for a first interest rate step in the summer. Bundesbank President Joachim Nagel told the news magazine “Spiegel”: “From my current perspective, we will have to make a first interest rate step in July and let more follow in the second half of the year”. He is thus backing up statements by ECB President Christine Lagarde, who already signaled a tightening of monetary policy last week and also held out the prospect of a first interest rate step in July. In addition, she stated that the regime of negative interest rates could end by the end of the third quarter. Financial markets currently expect an interest rate hike of 25 basis points in July.
The Ifo Institute expects inflation in Germany to fall slightly in the second half of the year. Accordingly, a survey conducted by the institute in May showed that price expectations had fallen slightly compared with the previous month. The corresponding index is still high. However, the trend suggests that the annual inflation rate will fall from over 7% to below 6% in the second half of the year. In April, inflation in Germany climbed to +7.4%, the highest level since German reunification in 1990.
|00:00||US||Holiday (Memorial Day)|
|08:00||GE||Import Prices (April, y/y)||+31.2%|
|09:00||SZ||KOF Economic Indicator (May)||101.7|
|11:00||EZ||Economic Sentiment (May)|
|11:00||EZ||Business Climate (May)||1.98|
|11:00||EZ||Consumer Confidence (May)||-21.1|
|14:00||GE||Consumer Prices (April, y/y)||+7.8%|
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Source: LGT Bank (Switzerland) Ltd.
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