Sir Keir Starmer’s Labour Party won a resounding victory in the UK’s general election, ending 14-years of turbulent Conservative rule. Results show that the opposition Labour Party has won 412 parliamentary seats of the total 650, the most since Tony Blair’s 1997 triumph. This translates as roughly 63% of the total seats. Voter turnout was just 60% for this election. The new British Prime Minister promised a government of “stability and moderation”. The UK’s FTSE 100 Index added 0.49% for the week.
In Europe, the pan-European STOXX Europe 50 Index ended last week1.74% higher. France’s second round of elections have resulted in a likely hung parliament, as left wing and centrist parties warded off the threat of a right-wing majority.
Speaking at the European Central Bank’s (ECB’s) annual retreat in Portugal, ECB President Christine Lagarde appeared to strike a slightly more hawkish tone. She said that Europe is “still facing several uncertainties regarding future inflation” and that the Central Bank does not have sufficient evidence that inflation threats have passed. Latest data points showed inflation in the eurozone edging down to 2.5% in June from 2.6% while the unemployment rate was unchanged at 6.4% in May.
In the US, President Joe Biden remained defiant on Friday that he is staying in the presidential race and denounced efforts to push him out after more than a week of sustained media frenzy focused on his poor debate performance.
Widely monitored labour data released Friday morning reflected a 206,000 increase in nonfarm payrolls in June, and a slight uptick in the unemployment rate, which rose to 4.1%. The jobless rate rose to the highest since late 2021, the latest in data as well as downward revisions to prior months raises the odds of rate cuts in the coming months ahead. Economists had expected the jobless rate to remain steady at 4%.
The S&P 500 rose to a new high on Friday, although the market’s gains remained notably narrow. All three major indexes finished the week in the green. The Nasdaq Composite advanced 3.5%, and the S&P 500 climbed 1.95%. The Dow underperformed, adding close to 0.7%. Markets were closed Thursday for Independence Day.
In Asia, Japan’s stock markets gained ground, with the benchmark Nikkei 225 Index climbing 3.36%. The yield on Japan’s 10-year sovereign bonds climbed to 1.1%—its highest level since 2011—before easing later in the week.
Chinese equities fell as underwhelming manufacturing data reinforced concerns about the slowing economy. The Shanghai Composite Index registered a modest loss for the week. In Hong Kong, the benchmark Hang Seng Index gained 0.46% during a holiday-shortened week, according to FactSet.
Iran elected 69-year-old Masoud Pezeshkian to its presidency, in an unexpected victory for the country’s reformist camp amid deep social discontent, economic hardship, and regional war.
Pezeshkian won 16.3 million votes, according to reports, with the election seeing a 49.8% turnout. His rival Saeed Jalili, a hard-line right-wing former nuclear negotiator, finished the race with 13.5 million votes. But power and critical decision-making in Iran ultimately lies with the supreme leader, Ayatollah Khamenei, and unelected institutions like the Revolutionary Guards.
On the commodities market, gold was up 2.8% for the week at $2,391, its highest level in a month, while Brent crude ended the week firmer at $86.83 a barrel.
Market Moves of the Week
Following the announcement of President Cyril Ramaphosa’s government of national unity cabinet earlier in the week, investors particularly welcomed the reappointment of Enoch Godongwana as finance minister and David Masondo as his deputy, viewing it as a clear commitment to fiscal prudence and economic structural reforms. Under the new unity government, the ANC retained the majority with 20 out of 32 Cabinet minister seats, while the DA secured six seats.
In a major milestone, South Africa enjoyed a hundred (100) days of no load-shedding, Eskom said in a statement on Friday. The breakthrough is the result of a recovery plan initiated in March 2023 and “aggressive” maintenance of the company’s power plants, the company said. The improved electricity performance is raising investor confidence. The South African Reserve Bank projects the SA economy to grow 1.2% this year.
For the week, the all-share index was up 1.37% and is just over 5% higher year to date. South Africa’s 10-year government bond yield was also stronger, as yields fell below 10%. On the currency front, at the close, the rand had strengthened to R18.23, having touched an intraday best of R18.15/$.
Chart of the Week
US hiring and wage growth stepped down in June while the jobless rate rose to the highest since late 2021, bolstering prospects that the Federal Reserve will begin cutting interest rates in coming months. Nonfarm payrolls rose by 206,000 and job growth in the prior two months was revised down by 111,000, the Bureau of Labor Statistics said Friday.
