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).

This week marked the end of May, with the S&P 500 reaching its highest level since mid-August 2022 and the Nasdaq Composite hitting its best level since mid-April 2022. The agreement reached between the White House and Republican congressional leaders to raise the federal debt limit and avoid a default did not significantly impact investor sentiment, as indications of a deal had already emerged. Economic data took centre stage, with U.S. employment data in the spotlight.

The Senate passed legislation to suspend the U.S. debt ceiling and impose restraints on government spending through the 2024 election. President Joe Biden is set to formally end the month-long debt-limit crisis this weekend.

Employment data released during the week was mixed. A report on Wednesday showed that job openings rebounded much more than expected in April and hit their highest level (10.1 million) since January. However, Friday’s release showed that U.S. unemployment unexpectedly rose from 3.4% to 3.7%. The Labor Department also highlighted an increase in the number of people losing jobs or completing temporary positions, reaching the highest level since February 2022. Overall, these findings suggest a more challenging job market for workers. The Federal Reserve is signalling that they plan to keep interest rates steady in June while retaining the option to hike further in coming months. Friday’s unemployment data reinforces this possibility.

Another encouraging sign regarding interest rates was the release of U.S. manufacturing data for May. Data showed a seventh straight monthly contraction in factory activity, as expected. Encouragingly, prices paid for supplies and other inputs by manufacturers contracted at the fastest pace since December, defying expectations for a modest increase.

Eurozone inflation decreased more than expected in May, increasing by 6.1%, also down from a 7.0% increase in the previous month. The unemployment rate decreased to 6.5% in April, in line with market expectations, following a revised rate of 6.6% in March. Manufacturing PMI in the eurozone declined to 44.80 in May, down from 45.80 in the previous month.

UK house prices experienced a marginal decrease of 0.1% on a monthly basis in May, following a revised increase of 0.4% in the previous month. Market expectations had anticipated a 0.5% decline. This decline in house prices reflects wider concerns in the UK property market. Moody’s recently downgraded the debt of Canary Wharf, a prominent symbol of the global real estate downturn. The east London financial district, saw its debt rating lowered from Ba1 to Ba3.

In China, the official manufacturing Purchasing Managers’ Index (PMI) dropped unexpectedly to 48.80 in May, indicating a contraction for the second consecutive month. This suggests that the post-Covid recovery in China’s economy is facing challenges. However, the services PMI rose to 54.5, albeit below expectations, but still indicating expansion.

On the other hand, the private Caixin manufacturing PMI index surprisingly increased to 50.90 in May, contradicting the official data and showing a slight expansion in manufacturing activity. The Caixin index mainly covers smaller and export-oriented businesses.

U.S. and Asian markets were stronger this week, whilst European markets ended in negative territory. In the U.S., the Dow Jones (+2.02%), S&P 500 (+1.83%) and Nasdaq (+2.04%) all ended the week higher. Similarly, the Nikkei 225 (+1.97%), Hang Seng (+1.05%) and Shanghai Composite Index (+0.55%) also ended the week higher, whilst the Euro Stoxx 50 (-0.32%) and FTSE 100 (-1.80%) were negative.

President Joe Biden, House Speaker Kevin McCarthy and their negotiators reached a tentative agreement to raise the debt ceiling on Saturday evening, ending a months-long stalemate. President Joe Biden described the agreement as a “compromise”, while House Speaker Kevin McCarthy said it “has historic reductions in spending”. Republicans have been seeking spending cuts in areas such as education and other social programs in exchange for raising the $31.4tn (£25tn) debt limit, a law that caps how much debt the US government can accrue. Recent U.S. market performance has been closely linked to the development of the talks, with signs of renewed momentum in the talks spurring a market rally on Friday.

The core personal consumption expenditures price index, the U.S. Federal Reserve’s (the Fed) preferred inflation measure, rose 4.7% y/y in April, up from March’s 4.6% y/y reading. The print signals that inflation remains sticky and that insufficient progress has been made in bringing down core inflation. Personal income experienced a strong increase of 0.8%, while personal spending surpassed expectations with a rise of 0.5%. These figures indicate that the U.S. economy still remains resilient. Markets are currently pricing in one more interest rate hike from the Fed over the next two meetings and less than one rate cut by year end.

The Fed’s May meeting’s minutes were released during the week, revealing that Federal Reserve officials were divided over whether further rate hikes would be necessary to lower inflation, given the high uncertainty surrounding the impact of banking-sector stresses on the economy. Some participants commented that “based on their expectations that progress in returning inflation to 2% could continue to be unacceptably slow, additional policy firming would likely be warranted at future meetings.”

April’s inflation figure in the United Kingdom came in above expectations, with a year-over-year rate of 8.7% compared to the previous month’s 10.1% y/y rise. Consensus had anticipated a decrease to 8.2% in the Consumer Price Index (CPI). Meanwhile, core inflation rose to 6.8% y/y, reaching a new peak within the current cycle. Following the release of this data, investors adjusted their expectations and priced in an additional half-point increase in rates by the Bank of England.

According to a survey conducted by S&P Global, business output in the eurozone continued to grow for the fifth consecutive month in May. However, the rate of growth moderated slightly due to manufacturing weakness, which offset another robust month of activity in the services sector.

On the market front, global indices ended the week mixed. The S&P 500 Index climbed +0.32%, while the Dow Jones slipped -1.00%. The technology-heavy Nasdaq Composite outperformed and ended the week up +2.51% as a rush for artificial intelligence–focused stocks sparked a U.S. rally late in the week. Notably, shares of chipmaker NVIDIA surged +24% on Thursday after the company beat consensus first-quarter earnings expectations by a wide margin and raised its profit outlook. Shares in Europe fell -1.32% (Euro Stoxx 50) over the week while the FTSE 100 declined -1.67%.

Chinese equities fell over the week following a series of discouraging indicators in recent weeks that indicated a slowdown in their economic recovery. The Shanghai index ended the week down -2.16% as a result. In Japan, the Nikkei 225 gained +0.35%. Gold dipped -1.58% while Brent Oil rose +1.74% over the week.