Key Takeaways for Investors

1. US Stock Market: US stock indices experienced losses on Friday due to concerns surrounding the debt ceiling, which weighed on market sentiment. The Dow Jones, Nasdaq-100, and S&P 500 all closed the day with declines.

2. Dollar and Oil Prices: The US dollar strengthened against other currencies, and Brent Crude Oil prices rose. These movements in the currency and commodity markets reflect the cautious sentiment among investors.

3. US Housing Market: The US housing market showed signs of slowing down in April, with existing home sales declining on a monthly basis. This could be influenced by tightened financial conditions following interest rate hikes by the Federal Reserve.

4. Focus on Fed Minutes: Investors will closely analyze the minutes of the recent Federal Open Market Committee (FOMC) meeting, where the Fed raised interest rates. The minutes will provide insights into the Fed’s stance on future rate hikes and their concerns regarding inflation.

5. Economic Indicators: This week, key economic indicators such as the S&P Global Manufacturing and Services Purchasing Managers’ Index (PMI) will be released, offering insights into the latest economic activity. Investors will also monitor revised GDP growth rate data and Personal Consumption Expenditures (PCE) Price Indexes for the first quarter.

6. European Economic Outlook: Flash PMI data for the manufacturing and services sectors in Europe will be released, indicating the economic outlook for the region. The German IFO Business Climate Index and consumer confidence data for the Eurozone and Germany will provide further insights.

7. New Zealand and South Korea Monetary Policy: The Reserve Bank of New Zealand is expected to raise the policy interest rate by 25 basis points to 5.5%, aiming to bring inflation back within the target range. The Bank of Korea is anticipated to maintain its policy interest rate unchanged at 3.5%.

On Friday, US stock indices experienced losses as ongoing worries surrounding the debt ceiling impacted market sentiment.

The Dow-Jones Index (INDEXDJX: DJI), Nasdaq-100 Index (NDX:USN), and S&P-500 Index (SPX: USY) closed the day with declines of 0.33%, 0.24%, and 0.14%, respectively.

The US dollar index (DXY) strengthened by 0.5% to 103.2, while Brent Crude Oil (LCO07: USC) prices increased by 1.9% to $75.6 per barrel.

The US 10-year Treasury yield rose by 21 basis points to reach 3.67%, while the 2-year Treasury yield, which is more sensitive to monetary policy developments, climbed by 28 basis points to 4.27%.

Regarding the US housing market, existing home sales in April continued their decline, falling by 3.4% on a monthly basis. This downward trend suggests a slowdown in the housing market, potentially influenced by tightened financial conditions following the Federal Reserve’s interest rate hikes.

Investors will focus on the minutes of the Federal Open Market Committee (FOMC) meeting held on May 2-3, which will be released on Wednesday. In the previous meeting, the Fed raised interest rates by 25 basis points, bringing the federal funds rate to a range of 5.00%-5.25%. While the decision signaled a possible end to interest rate hikes, Fed Chair Powell, in his post-decision statement, emphasized vigilance regarding high inflation and stated that they would tighten monetary policy further if necessary, remaining data-dependent.

On Tuesday, investors will also be monitoring the S&P Global Manufacturing and Services Purchasing Managers’Index (PMI) for May, which will provide insights into the latest economic activity.
In April, the manufacturing sector PMI increased from 49.2 to 50.2, indicating a return to growth above the contraction zone (below 50) after five months.

The services sector PMI rose from 52.6 to 53.6, indicating an accelerated growth trend and its third consecutive month in the expansion zone.

On Thursday, the revised annualized quarterly GDP growth rate for the first quarter of the year will be released. Moreover, the Personal Consumption Expenditures (PCE) Price Indices, including core measures, will provide revised data for the first quarter.

According to preliminary estimates, the annualized quarterly PCE Price Index increased from 3.7% to 4.2%, and the core PCE Price Index rose from 4.4% to 4.9%, indicating elevated price pressures and reaching the highest level since the first quarter of last year.

The PCE deflator for April, along with personal income and spending figures for the same month, will be published on Friday, as they are important indicators closely monitored by the Fed.

Regarding the labor market, the weekly initial jobless claims will be released on Thursday. The previous report showed a higher-than-expected decrease from 264,000 to 242,000, indicating a tight labor market despite reaching the highest level in the past 18 months.

Additionally, housing market data for April, including new home sales on Tuesday and pending home sales on Thursday, will be of interest to investors.

Finally, on Friday, the final reading of the University of Michigan Consumer Sentiment Index for May and preliminary data on durable goods orders for April will be released.

The preliminary University of Michigan Consumer Sentiment Index data for May indicated a decline in consumer confidence in the United States after dropping from 63.5 to 57.7, reaching its lowest level in the past six months.

On Tuesday, the focus in Europe will be on the flash PMI data for the manufacturing and services sectors for May, which will provide insights into the latest economic outlook. The April PMI data indicated a significant imbalance in economic activity in the region, largely driven by the services sector, with divergent demand conditions between the manufacturing and services sectors.

On Wednesday, the German IFO Business Climate Index for May will be released, reflecting the assessments of firms operating in manufacturing, construction, wholesale, and retail trade sectors in Germany regarding the current and future six-month period. In April, the IFO Business Climate Index rose from 93.2 to 93.6, surpassing expectations and extending its upward trend for the sixth consecutive month, reaching the highest levels since February 2022.

Furthermore, today, the Euro Area preliminary consumer confidence for May and Germany’s GfK consumer confidence for June on Thursday will be released. In April, the Euro Area consumer confidence index rose from -19.1 to -17.5, surpassing expectations and reaching the highest level since February 2022.

Euro Area’s final GDP growth rate for the first quarter of the year will be released on Thursday, providing insights into the country’s economic performance.

The United Kingdom Consumer Price Index (CPI) will be released on Wednesday, influencing the Bank of England’s (BoE) monetary policy decisions.

In March, the monthly headline CPI slowed from 1.1% to 0.8% (above expectations of a 0.5% increase), while the annual CPI declined from 10.4% to 10.1% (above expectations of 9.8%).

Throughout the week, speeches from key officials, including ECB President Lagarde and BoE Governor Bailey, will be closely monitored for any signals regarding potential changes in monetary policy.

The Reserve Bank of New Zealand’s meeting will take place on Wednesday. In their previous meeting, the central bank raised the policy interest rate by 50 basis points to 5.25%, exceeding expectations of a 25 basis point increase, to bring inflation back within the medium term. target range. This week, the bank is expected to raise the policy interest rate by 25 basis points to 5.5%.
The Bank of Korea’s meeting will be held on Thursday. In their previous meeting, the central bank kept the policy interest rate unchanged at 3.5%, in line with expectations. The market anticipates that the bank will maintain the policy interest rate at the same level in this week’s meeting.