Markets Show Resilience After Tough Month
US: S&P 500 Index +4.4%, Dow +4.7%, Nasdaq +3.9%
Europe: STOXX Europe 600 +2.3%, German DAX +2.7% France CAC 40 +3.0%, U.K. FTSE 100 +1.4%
Asia: Japan Nikkei +1.4%, China Shanghai Composite -2.5%, Korea KOSPI +1.5%
Rates/Commodities: 10-Year Treasury yield -6 basis points to 2.08%, WTI crude oil -1.7%, COMEX gold: +2.3%
Stocks rebounded firmly this week, brushing off a rough May in which the S&P 500 Index declined for four straight weeks. While trade policy has been the common theme in markets recently, monetary policy has re-entered the spotlight as investors look for clues from the Federal Reserve (Fed) about their next policy decision. Market participants are positioning for at least one rate cut in 2019, and a weaker-than-expected May jobs report may have bolstered their argument. Fed Chair Jerome Powell also stated publicly that policymakers “will act as appropriate to sustain the expansion” in light of recent trade developments, fueling the strongest S&P 500 daily gain since January. While the Fed’s Beige Book, released on June 5, pointed to improving sentiment on Main Street, the qualitative assessment of economic conditions continues to highlight the lingering concern over trade negotiations. “Main Street’s sentiment is improving, but there are still clear areas of concern,” said LPL Chief Investment Strategist John Lynch. “We remain hopeful that the United States and China will reach some kind of a trade agreement—or at least a trade truce—in the next few months.”
Across the pond in Europe, the European Central Bank (ECB) left its key policy settings on hold, though it announced further delay in adjustments until at least the first half of 2020. The dovish stance toward monetary policy persists as inflation remains muted and economic growth remains tilted to the downside. ECB President Mario Draghi reiterated that the central bank stands ready to implement any necessary policy tools, including rate cuts or the extension of quantitative easing to bolster growth in the region.
The week ahead includes several key economic announcements, with the U.S. docket headlined by the National Federation of Independent Business Small Business Optimism Index, along with consumer and producer price indexes. Overseas, several important trade barometers are slated for release from China, which could give some clues to the outlook for future trade negotiations. Track these and other important events on our Weekly Global Economic & Policy Calendar.
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FTSE 100 Index measures the 100 companies listed on the London Stock Exchange with the highest market capitalization.
The Shanghai Stock Exchange Composite Index is a capitalization-weighted index. The index tracks the daily price performance of all A-shares and B-shares listed on the Shanghai Stock Exchange. The index was developed on December 19, 1990 with a base value of 100. Index trade volume on Q is scaled down by a factor of 1000.
The Hang Seng index is a market capitalization weighted index which tracks daily changes of the 48 largest companies in the Hong Kong stock market.
The Standard & Poor’s 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
The small business optimism index is compiled from a survey that is conducted each month by the National Federation of Independent Business (NFIB) of its members. The index is a composite of ten seasonally adjusted components based on questions on the following: plans to increase employment, plans to make capital outlays, plans to increase inventories, expect economy to improve, expect real sales higher, current inventory, current job openings, expected credit conditions, now a good time to expand, and earnings trend.
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