On Thursday, the S&P500 index experienced a significant development as it entered a bull market. The broad equities benchmark demonstrated a 0.6% increase, concluding the day at 4,292.93 points. This surge represents a notable 20% leap from its lowest point on October 12, 2022, when it stood at 3,577.03 points. Investors reacted favourably to indications from the Central Bank, which suggested that it is nearing the conclusion of its interest rate hiking cycle. Last week, the Federal Reserve hinted that it is likely to abstain from implementing a rate hike during its June 13-14 meeting. This anticipated pause has acted as a catalyst, propelling stock prices to higher levels.

On Thursday, the US Labour Department reported that weekly jobless claims had unexpectedly increased this week to 261,000, well above expectations and the highest level since October 2021.

Economists at the World Bank have revised their global GDP forecast for 2023, increasing it from the earlier projection of 1.7% to 2.1%. This upward adjustment indicates an improvement; however, it also suggests a significant deceleration compared to the 3.1% growth rate observed in 2022. In addition, the World Bank has reduced its growth outlook for 2024 from 2.7% to 2.4%.

While major economies have exhibited more resilience than anticipated in 2023, the economists caution that the impact of higher interest rates and tighter credit conditions will likely dampen growth in 2024. These factors are expected to take a toll on economic expansion going forward.During a meeting at the White House, US President Joe Biden and UK Prime Minister Rishi Sunak reached an agreement to initiate negotiations on a trade pact between their countries. This trade agreement holds the potential to benefit British automakers by allowing them to qualify for electric car subsidies. Furthermore, it could facilitate the joint development of advanced weaponry. The focus of the trade discussions would revolve around critical materials that play a vital role in the production of batteries used in electric vehicles. The proposed trade package aims to foster collaboration and strengthen economic ties between the US and UK.

According to revised GDP data, the Eurozone’s economy experienced a technical recession during the winter period, albeit by a small margin. The data reveals that the economy contracted by 0.1% in both the fourth quarter of 2022 and the first quarter of this year. This weak growth performance is not unexpected, considering the significant impact of the war in Ukraine on European energy markets.

In Japan, revised figures released this week by the Cabinet Office indicates that the economy experienced stronger growth than initially estimated during the first quarter of 2023. Gross domestic product (GDP) expanded at an annualized rate of 2.7% quarter on quarter, surpassing the initial reading of 1.6% and exceeding economists’ forecasts. The upward revision of first-quarter GDP can be largely attributed to robust corporate investment. Despite apprehensions surrounding a slowdown in global growth, particularly in China, businesses in Japan demonstrated increased spending as sentiment remained resilient.

Saudi Arabia has announced its intention to implement an additional reduction of 1 million barrels per day in oil supply during July. This decision has been prompted by a decline in crude prices and will bring the country’s production to its lowest level in several years. Despite the potential consequences, this bold step has been taken by Saudi Arabia, which holds significant importance as a member of the OPEC+ coalition, with the aim of stabilizing the market.

However, it is important to note that this move does involve some concessions to key allies. Russia, a prominent member of the coalition, has not committed to further output cuts. Additionally, the United Arab Emirates (UAE) has negotiated a higher production quota for the year 2024. Despite these compromises, Saudi Arabia’s Energy Minister, Prince Abdulaziz bin Salman, has expressed a strong commitment to taking whatever measures are necessary to restore stability to the market. Brent Crude Oil closed the week lower, down 1.65% to $74,94 bbl.

Chinese equities ended the week on a mixed note, following the release of the latest inflation data, which has increased concerns surrounding the post-pandemic recovery, China’s CPI rose 0.2% in May.  The recent release of weak export and import data has fuelled expectations for increased economic stimulus in China. The data indicates that both domestic and international demand remain subdued. In May, exports experienced a significant decline of 7.5% compared to the previous year, surpassing initial forecasts for a weaker performance. Additionally, imports fell by 4.5% compared to the same period last year. Notably, China’s share of US goods imports in April reached its lowest level since 2006, as reported by The Wall Street Journal. Analysts are concerned that exports may further decline, despite their current elevation compared to pre-COVID levels.

The Shanghai Composite index posted a modest gain of 0.04% for the week, while Hong Kong’s Hang Seng Index extended the previous week’s gains, posting a strong 2.32% week-on-week return.

US stocks ended the week slightly higher, with the S&P 500 up 0.39%, the Dow Jones Industrial Average up 0.34%, and the tech heavy Nasdaq Composite rising slightly 0.14%. The Euro Stoxx 50 ended the weak lower (-0.78%), while the FTSE 100 (0.96%) closed the week in positive territory. Japan’s Nikkei 225 index gained 2.35% this week, continuing its positive trend for the year (23.65% YTD).

Market concern eased late in the week, with investors less worried that the U.S. Department of the Treasury will default on its debt in early June. On Thursday, investors were buoyed by comments from Speaker of the House of Representatives Kevin McCarthy, who said he hopes to have legislation raising the debt cap on the House floor in the week ahead. Then on Friday morning the high stakes talks over raising the debt limit appeared to stall before resuming in the Capitol on Friday evening. One of the toughest sticking points in the talks has been the question of spending caps, a key Republican demand but a red line for a significant bloc of Democrats.

US retail sales rose 0.4% in April, after falling by 0.7% the prior month and below consensus expectations at its slowest year-over-year pace (1.6%) since early in the pandemic. Core sales, which strip out sales of autos, gasoline, building supplies and food services, rose 0.7%, beating expectations for a 0.3% rise while industrial production rose 0.5% in April, well above expectations, driven in part by increased auto manufacturing.

Shares in Europe advanced amid optimism that interest rates could be close to peaking and that the U.S. would avoid a debt default. In local currency terms, the pan-European STOXX Europe 50 Index ended the week 1.79% higher while the UK’s FTSE 100 Index was flat on the week.

The European Commission raised its forecasts for eurozone economic growth this year and next, while predicting that inflation would remain stubbornly high. The latest projection calls for gross domestic product (GDP) to expand 1.1% this year and 1.6% in 2024, up from the previous forecast for growth of 0.9% and 1.5%, respectively.

The UK’s unemployment rate crept up to 3.9% in the three months through March, from 3.8% in the three months through February, the national statistics office said. However, wage growth showed little signs of easing over the period. Average weekly pay excluding bonuses rose to 6.7% compared with a year earlier, from 6.6%.

Ukrainian President Volodymyr Zelenskyy arrived Saturday in Japan for diplomatic talks with leaders of the world’s most powerful democracies participating in the Group of Seven (G-7). The G-7 have so far decided against imposing a near-outright ban on exports to Russia and will instead look to widen existing sanctions and restrictions on key Russian sectors, such as manufacturing, construction, transportation and business services.

According to the final presidential election results announced by the Supreme Election Court, the incumbent President Recep Tayyip Erdogan received 49.5% of the vote in the first round of voting in Turkey’s presidential election last Sunday versus 44.9% for his main opponent, Kemal Kilicdaroglu. The voter participation rate was high, as expected, with about 88%, or over 56 million voters, casting ballots. Erdogan is expected to defeat opposition leader Kemal Kilicdaroglu in the runoff between the two on Sunday, 28 May.

U.S. equities were higher this week, with the S&P 500 Index gaining 1.65%, and the Nasdaq Composite gaining 3.04%. It was the best weekly performance since March for both indexes, while the Dow added 0.38%.

Japanese equities reached their highest levels this week since its equity market burst in 1989. Improved corporate governance, solid domestic earnings and renewed interest on the part of foreign investors have bolstered share prices so far in 2023 while Q1 GDP growth of 1.6% doubled economists’ forecasts. The benchmark Nikkei 225 Index gained 4.8% for the week.

In China, official data showed industrial output, retail sales, and fixed asset investment grew at a weaker-than-expected pace in April from a year earlier. Nevertheless, the Shanghai Stock Exchange Index managed a gain of 0.34% for the week while in Hong Kong, the benchmark Hang Seng Index declined 0.90%.

Following a report released by the Labor Department on Wednesday, the U.S. consumer price index (CPI), a widely recognized measure of inflation that assesses the cost of a diverse range of goods and services, showed a monthly increase of 0.4%. This figure aligns with the estimated value provided by Dow Jones. On an annual basis, the increase amounted to 4.9%, slightly lower than the projected 5% and marking the slowest pace since April 2021. In comparison, the annual rate in March stood at 5%. Additionally, core CPI, which excludes the volatile food and energy categories, saw a monthly increase of 0.4% and a 5.5% increase from the previous year, in line with expectations.

In a separate report this week, the Labor Department revealed that the producer price index (PPI), a metric that measures prices for final demand goods and services, experienced a 0.2% increase, slightly below the Dow Jones estimate of 0.3%, following a 0.4% decline in March. Excluding food and energy, the core PPI also rose by 0.2%, aligning with expectations. On an annual basis, the headline PPI increased by 2.3%, down from 2.7% in March and representing the lowest reading since January 2021. However, despite the PPI rise being less than expected, the services index displayed a notable increase of 0.3%, the biggest move since November 2022, according to the report from the Bureau of Labor Statistics.

The Bank of England raised interest rates by 0.25% to reach 4.5% in response to persistent inflationary pressures, indicating the need for further policy tightening. Alongside this decision, the bank expressed confidence in the United Kingdom’s ability to avoid a recession this year. This marks the 12th consecutive increase in borrowing costs by the monetary policy committee (MPC), representing the bank’s most assertive rate-hiking cycle since the 1980s, driven by the goal of curbing double-digit inflation in the UK. Despite a slight decrease in March that fell below expectations, the inflation rate has remained stubbornly high at 10.1%, the highest among G7 nations. The Bank of England has adjusted its inflation forecast, now projecting it to surpass 5% by year-end, compared to the below 4% estimate made in February. This adjustment is attributed to elevated food prices, experiencing their fastest annual growth since 1977, and a resilient job market. Currently, market expectations point to the Bank of England’s terminal rate ranging from 4.75% to 5%.

China experienced its slowest consumer inflation growth in over two years in April, with the consumer price index (CPI) rising by 0.1 percent year-on-year, according to the National Bureau of Statistics (NBS). This reading represents the lowest rate since February 2021. In March, China’s inflation rate eased to 0.7 percent after reaching a recent peak of 2.8 percent in September. Core inflation, which excludes food and energy, remained unchanged at 0.7 percent year-on-year and 0.1 percent month-on-month. On the other hand, the producer price index (PPI), which indicates the prices charged by factories to wholesalers, experienced its most significant decline since May 2020. It fell for the seventh consecutive month, missing expectations, with a year-on-year decrease of 3.6 percent in April, compared to a 2.5 percent drop in March.

The performance of major indexes was mixed for the week, coinciding with the conclusion of first-quarter earnings reports. The Nasdaq Composite, which has a heavy focus on technology stocks, outperformed its counterparts, recording an increase of +0.4%. This was largely attributed to Google’s parent company, Alphabet, which announced a new artificial intelligence-based search platform. On the other hand, the Dow Jones Industrial Average, which is more narrowly focused, struggled and was weighed down by Disney’s disappointing report of a decline in subscribers to its streaming platform, Disney+. As a result, the index declined by -1.1%. Similarly, the S&P 500 experienced a decrease of -0.29% over the week. In Europe, the Euro Stoxx 50 and FTSE 100 indexes also ended the week with negative movements of -0.52% and -0.31% respectively. Across Asian-Pacific markets, there was a mixed trend. Hong Kong’s Hang Seng Index experienced the most significant decline with a weekly movement of -2.12%, followed by mainland China’s Shanghai Composite, which fell by 1.86%. In contrast, Japan’s Nikkei index recorded positive gains of 0.79% for the week.

The week was marked by volatility in U.S. regional banks after California-based First Republic Bank failed and was taken over by regulators. The subsector of regional banks in the S&P 500 experienced significant volatility amid concerns about potential bank failures and the credit pressures that could arise if the economy slows and unemployment increases. Despite a rally on Friday, the S&P 500 Index ended the week lower, as a result of comments from Federal Reserve Chair Jerome Powell that implied a potential delay in the pivot towards rate cuts, which had been expected by the market.

Additionally, concerns regarding the U.S. debt ceiling may have contributed to the uneasiness, with Treasury Secretary Janet Yellen warning that the agency may not be able to meet its debt obligations as early as June 1. Within the S&P 500, the information technology sector performed well and closed higher, while energy shares pulled back in correlation with the price of crude oil. Brent crude oil closed the week lower at $75,27 bbl., a -6.21% price reduction.

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) implemented the widely anticipated 25 bps hike this week, aligning with market expectations. However, the FOMC also signalled a probable pause in June, which could potentially mark the end of the current rate hiking cycle. Chairman Powell emphasized that he does not foresee the banking stress to result in a recession, and he also mentioned the possibility of a soft landing for the economy.

In April, the U.S. economy added 253,000 jobs, surpassing expectations of a monthly gain of 185,000. However, downward revisions to the data for the prior two months subtracted 149,000 jobs. The unemployment rate dropped to 3.4%, reaching its lowest level since the 1960s. Following the release of this data, 10-year U.S. Treasury yields experienced a significant increase after having initially declined earlier in the week due to concerns surrounding the banking sector stress.

According to recent data, the UK housing market is showing signs of stabilisation, as mortgage approvals for home purchases increased for the second consecutive month in March. The number of approved mortgages rose sharply to 52,011, up from 44,126 in February, representing the largest number since October 2022. Despite this improvement, it is worth noting that mortgage loan approvals remain below their monthly average of around 70,000 prior to the economic turmoil caused by the mini-budget proposal under former Prime Minister Liz Truss in September 2022, which caused a spike in long-term interest rates and led to a withdrawal of funds from the market by lenders.

In the Eurozone, major stock indexes were mixed, as recession fears and banking tremors continued to weigh on sentiment. Germany’s DAX ticked slightly higher 0.24%, while France’s CAC 40 index weakened by 0.78%. The Euro STOXX 50 also ended the week slightly lower, down 0.43%.

The Eurozone inflation data released recently was in line with expectations, with core inflation declining to 5.6% year-on-year, while headline inflation increased to 7% year-on-year, slightly surpassing consensus estimates. As anticipated, the European Central Bank (ECB) decided to moderate the pace of interest rate hikes, implementing a 25-bps adjustment. The ECB noted that previous rate increases were now exerting a notable impact on financial conditions. President Lagarde emphasized that risks to the inflation outlook remain biased towards higher levels and that the ECB still has progress to make in addressing these concerns. Forecasts suggest an additional 25-bps increase in interest rates in both June and July, aiming to reach a terminal rate of 3.75%.

At the geopolitical front, tensions between the West and Russia remain elevated. Russia has accused Ukraine of utilizing drones in an attack on the Kremlin, allegedly targeting Russian President Vladimir Putin for assassination. Kyiv has denied these allegations. On Thursday, the Kremlin asserted that the United States was the mastermind behind these attacks.

Japan’s stock markets experienced a positive start during the first two days of the week but remained closed for the remainder of the period due to the Golden Week national holidays. The Nikkei 225 Index returned 1.0%, while the broader TOPIX Index gained 0.9%. On Monday, the markets rallied significantly due to a sell-off in the yen, which helped improve the outlook for Japan’s exporters. This followed the Bank of Japan’s decision, during its April 27-28 meeting, to maintain its ultra-easy monetary policy stance for the time being.

Chinese equities ended the week on a mixed note, following a shortened week due to the holidays, as unexpectedly weak manufacturing data affected market sentiment. China’s manufacturing sector displayed signs of weakness in April, with the official Purchasing Managers’ Index (PMI) falling from March’s reading of 51.9 to 49.2, indicating a return to contraction for the first time since December 2022. Despite this, the five-day holiday saw a strong rebound in domestic tourism, with around 274 million trips taken from Saturday through Wednesday, which is an increase of approximately 71% compared to the prior year. Furthermore, spending activity surged by 129% over the holiday period compared to the same period last year, raising hopes that a sustainable recovery in the service sector could potentially offset the weakness in manufacturing and the fragile property market.

US stocks ended the week mixed, with the S&P 500 down (-0.80%), the Dow Jones Industrial Average down (-1.24%), and the tech heavy Nasdaq Composite rising slightly 0.07%. The Euro Stoxx 50 ended the weak lower (-0.43%) and FTSE 100, (-1.17%) also closed the week in the red. Asian equity markets fared better, all closing the week higher, Japan’s Nikkei 225 index gaining 1.40%, and Hong Kong’s Hang Seng index rose 0.41%. While China’s Shanghai Composite index posted a modest gain of 0.34% for the week.

U.S. corporate earnings announcements were in the spotlight this week, as attention focused on the season’s busiest week of quarterly earnings reports. Tech heavyweights, Microsoft, Alphabet, Amazon, and Meta reported better-than-expected results, beating analyst estimates for revenue and profit, whilst cyclical sectors generally struggled.

With roughly half of S&P 500 companies having reported quarterly results, earnings for the period are down 1.7%, while revenues are up 4% versus the same quarter a year ago. In summary, this highlights that there is an encouraging level of ongoing demand, but profits remain under pressure from higher expenses.

However, concerns are growing about an economic slowdown in the coming months, as regional manufacturing activity measures fell well below expectations, signalling production cutbacks in April. The latest U.S. GDP report showed that the economy is losing momentum, with Q1 GDP slowing to 1.1% compared to 2.6% in the prior quarter, and below consensus expectations. The future of the U.S. economy depends on the strength of the job market, with historically low unemployment rates and consistent wage gains supporting consumer spending despite stubborn inflation.

The U.S. banking industry is also facing renewed turmoil, with California’s First Republic Bank reporting over USD 100 billion in deposit outflows in Q1, causing the stock to plummet. The Federal Deposit Insurance Corporation’s plan to take the bank into receivership further worsened the situation.

In the Eurozone, preliminary data showed that the economy grew by 0.1% on a quarterly basis in Q1 of 2023, missing the expected 0.2% growth estimate. The bloc’s annual GDP rate grew by 1.3% in Q1, falling short of the 1.4% expectation.

The Bank of Japan (BoJ) kept its benchmark interest rate unchanged at -0.1%, despite the Tokyo consumer price index increasing by 3.5% on a year-on-year basis in April, compared to expectations for a 2.6% increase. Unemployment increased to 2.8% in March, compared to 2.6% in the previous month.

In a landmark move, China has set up a nationwide real estate registration system, which paves the way for the implementation of a long-awaited property tax. This move is a critical component of President Xi Jinping’s Common Prosperity goals. According to state media reports, the integrated registration system, which took a decade to develop, has more than 1.5 billion real estate records across the country. This system provides the authorities with insight into who owns what and has long been regarded as a prerequisite for implementing a home ownership levy.

According to the World Bank, there is a likelihood of a decline in global commodity prices in 2023, the largest drop since the pandemic began. The bank has revised its projection for its commodity-price index and now expects a 21% reduction this year, which is more than what was anticipated in October.

India surpassed China as the world’s most populous country in April, this according to the UN. At the same time, India’s population is set to grow for several decades while the number of people in China shrinks.

Global equity markets were mixed this week. In the U.S., the Dow Jones (+0.86%), S&P 500 (+0.87%) and Nasdaq (+1.28%) all ended the week higher. In contrast, the Euro Stoxx 50 (-1.12%) and FTSE 100 (-0.55%) were negative, whilst Asian indices were mixed, including the Nikkei 225 (+1.02%), Hang Seng (-0.47%) and Shanghai Composite Index (+0.67%).

Following a relatively uneventful week in terms of economic data and financial news, the leading U.S. equity indices recorded robust gains. Energy stocks were buoyed by the upsurge in oil prices, with Brent Crude oil rising by over 7% to reach the $79 per barrel mark. This week marked the end of the first quarter of 2023, during which the tech-heavy Nasdaq Composite surged by over 16%, while the broader S&P 500 index recorded a gain of approximately 7%. The narrowly focused large-cap Dow Jones Industrial Average also posted a modest increase for the quarter.

The U.S. core (excluding food and energy) personal consumption expenditure price index for February exceeded expectations, coming in at 4.6% compared to the consensus forecast of 4.7%. The market responded positively to this news. The core PCE index is considered the Federal Reserve’s preferred measure of inflation, and while this is a promising development, the figure still exceeds the Fed’s long-term inflation target of 2%. In addition, The Commerce Department released revised 4th quarter GDP estimates, which were slightly lower at 2.6% quarter-over-quarter.

In U.S. political news, former President Donald Trump has been indicted by a Manhattan grand jury on Thursday in a probe regarding hush money payments made to Stormy Daniels during his 2016 campaign. The indictment is a historic event in American law and politics, Trump becomes the first ex-US president to face criminal charges. This event is certain to divide an already polarised society and electorate.

In February, the inflation data for the U.K. saw an unexpected rise, primarily due to an increase in food and beverage prices, following four consecutive monthly decreases. This indicates that the cost-of-living crisis is far from over, with prices in stores reaching an all-time high. On the other hand, revised official data showed that the U.K. was able to steer clear of a recession last year, thanks to government subsidies on energy bills. In the fourth quarter, the GDP saw a sequential growth of 0.1%, contrary to initial estimates of no growth. Meanwhile, the U.K. housing market continues to be weak, with house prices falling at the fastest annual rate since the GFC, according to mortgage lender Nationwide. Furthermore, Bank of England (BoE) data indicated a sharp decline in net mortgage lending in February.

In the Eurozone, shares rallied, for the back of easing concerns about financial instability. Major stock indexes across the region witnessed strong gains, with France’s CAC 40 index increasing by 4.38%, Germany’s DAX adding 4.49%, Italy’s FTSE MIB surging by 4.72%, and the Swiss Market Index (SMI) also gaining strongly by 4.41%. Preliminary estimates indicate that Eurozone inflation slowed more than anticipated, with annual consumer price growth dropping to 6.9% in March from 8.5% in February, as energy costs declined. Additionally, the unemployment rate for February remained stable at 6.6%.

Russian President Vladimir Putin has once again issued a warning regarding the possibility of deploying tactical nuclear weapons to Belarus, with the intent of placing them in closer proximity to the frontlines of the ongoing conflict in Ukraine. Belarus, in turn, has expressed its willingness to permit the hosting of such weapons on its territory, citing the need to bolster its defence capabilities in response to what it perceives as security threats posed by Western nations. The Ministry of Foreign Affairs of Belarus has reiterated this stance. Furthermore, President Putin has signed a decree on Thursday calling for the conscription of an additional 147,000 personnel between the months of April and July.

Chinese equities saw an uptick, fuelled by robust economic data and supportive remarks from Beijing, which have bolstered confidence in the country’s growth prospects. The International Monetary Fund (IMF) has projected that China’s recovery will contribute to around one-third of global growth in 2023, given the increased risks to economic stability following the banking sector’s recent turmoil. The IMF further predicts that China’s economy will expand by 5.2% this year, whereas global growth will slow to below 3.0%. The country’s manufacturing sector demonstrated continued expansion in March, with the official Purchasing Managers’ Index (PMI) climbing to 57 from 56.4 in February.

In other developments, Chinese e-commerce behemoth Alibaba Group has announced its intentions to divide itself into six units that can independently raise capital or pursue initial public offerings. Many market analysts believe that this restructuring may appease regulators and could mark the end of China’s long-standing crackdown on private enterprises.

US stocks ended the week higher, with the S&P 500 gaining 3.48%, the Dow Jones Industrial Average up 3.22%, and the Nasdaq Composite rising 3.37%. The Euro Stoxx 50, 4.46% and FTSE 100, 3.06% also closed the week in the green.  The positive trend extended to Asian equity markets all closing the week higher, Japan’s Nikkei 225 index gaining 2.40%, and Hong Kong’s Hang Seng index rose 2.36%. While China’s Shanghai Composite index posted a modest gain of 0.22% for the week.