Key Takeaways for Investors

1. The US stock market experienced gains on Friday, driven by the approval of the debt ceiling bill and expectations of the Fed delaying interest rate hikes in June.

2. May’s non-farm payrolls exceeded expectations, indicating strong employment growth. However, the unemployment rate rose, and inflationary pressure eased slightly.

3. Upcoming US data releases include S&P Global Services PMI, ISM Non-Manufacturing Index, durable goods orders, factory orders, and trade balance figures. These indicators will provide insights into economic activity and production trends.

4. European Economic Outlook: Investors should pay attention to PMI data, investor confidence, trade balance, retail sales, and GDP growth in the Eurozone. The region is experiencing challenges related to high inflation and tightening financial conditions.

5. Asia’s Economic Indicators: China’s CPI and PPI data for May will shed light on global inflation trends. Japan’s final Q1 GDP growth figures will also be released. The Reserve Bank of Australia is expected to keep its policy interest rate unchanged, and the Central Bank of Russia is likely to maintain its policy interest rate as well.

6. Monetary Policy Decisions: Throughout the week, speeches by central bank officials, including the ECB, will be closely monitored for any indications of future monetary policy decisions.

On Friday, the US stock market closed the day with gains, driven by the approval of the debt ceiling bill in the Senate and increasing expectations that the Fed will hold off on raising interest rates during its June meeting.

The daily basis performance of the stock indices on Friday showed the Dow-Jones Index (INDEXDJX: DJI) up by 2.12%, the S&P-500 Index (SPX: USY) up by 1.45%, and the Nasdaq Index (NDX: USN) up by 1.07%.

The US Dollar Index (DXY) ended the week with a 0.2% decrease, closing at the level of 104,25. Brent Crude Oil (LCO07: USC) closed the week at $76.1 per barrel, marking a 1.1% decline.

The yield on the 10-year US Treasury bond finished the week at 3.69%, recording an 11 bps decrease. Meanwhile, the 2-year US Treasury bond yield, which is more sensitive to monetary policy developments, closed the week at 4.50%, reflecting a 6 bps decline.

Last week, the latest employment data in the US, including non-farm payrolls, unemployment rate, and average hourly earnings, were closely monitored.

In May, non-farm payrolls in the United States increased by 339,000, surpassing expectations (195,000) and reaching the highest level in the past four months. Additionally, the previous month’s data was revised upward from 253,000 to 294,000, indicating a faster pace of employment growth despite expectations of a slowdown.

The unemployment rate in the United States rose from 3.4% to 3.7% in May, surpassing expectations (3.5%) and reaching the highest level since October 2022. The labor force participation rate remained steady at 62.6%, maintaining its highest levels since March 2020.

Inflation indicators, average hourly earnings, representing wage growth, slowed from a monthly rate of 0.4% to 0.3% in May, aligning with expectations. The annual growth rate of earnings also declined from 4.4% to 4.3%, indicating a partial easing of inflationary pressures driven by wages.

In terms of upcoming economic indicators, the final S&P Global Services PMI and ISM Non-Manufacturing Index for May, which will provide insights into the latest economic activity, will be released.

The services PMI for May rose to 55.1 from 53.6, indicating an acceleration in the sector’s growth, particularly in travel and entertainment industries.

In April, the ISM Non-Manufacturing Index increased slightly from 51.2 to 51.9, surpassing expectations and indicating a mild acceleration in growth for non-manufacturing sectors. This positive trend has continued for the fourth consecutive month.

On Monday, the final data for durable goods orders in April will be released. Despite expectations of a decline based on preliminary data, durable goods orders recorded a monthly increase of 1.1% following a 3.3% growth in March.

The factory orders for April, which will provide insights into the outlook for production, will be announced. After experiencing a two-month decline (2.1% in January and 1.1% in February), factory orders partially rebounded with a 0.9% increase in March, albeit below expectations.

The trade balance data for April will be released on Wednesday. In March, monthly exports increased by 2.1% to $256.2 billion, while imports declined by 0.3% to $320.4 billion.

On Thursday, investors will closely monitor the weekly initial jobless claims, which previously showed a slight increase from 230,000 to 232,000, indicating a tight labor market but still maintaining low levels.

Throughout the week, investors will also pay close attention to speeches from Federal Reserve officials for potential new signals regarding the central bank’s monetary policy decisions.

This week’s market updates focus on the European economic outlook, with important data releases on PMI figures, investor confidence, trade balance, retail sales, and GDP growth.

On Monday, the final PMI data for the S&P Global Services Sector in May will be released, indicating a slight decline in growth for the sector and suggesting a slowdown in the overall expansion in the region. Despite challenges posed by high inflation and tightening financial conditions, consumer spending remained strong.

The Sentix Investor Confidence Index for June in the Eurozone will also be released on Monday, with expectations of weak investor confidence due to concerns over high core inflation figures and the signal from the ECB regarding future interest rate hikes.

Also, the Eurozone Producer Price Index (PPI) for April will be announced on Monday. The PPI for March recorded a monthly decline of 1.6% due to the ongoing decrease in energy and intermediate goods prices, extending its decline for the third consecutive month. On an annual basis, the PPI slowed down from 13.3% to 5.9%, maintaining its deceleration trend and reaching the lowest level since March 2021. The expectation is for the slowdown in the PPI to continue.

Additionally, the German trade data for April will provide signals about the global trade outlook. In March, exports reached a record level while imports experienced a decline, indicating a mixed trend.

On Tuesday, the retail sales data for April in the Eurozone will be released, reflecting the trend of domestic demand. March saw a decline in retail sales for the second consecutive month, with an increased annual decline rate.

The factory orders data for April in Germany and the industrial production data will be monitored, providing insights into production trends.

On Thursday, the final GDP growth figures for the first quarter of this year in the Eurozone will be announced, indicating a modest growth rate below expectations. The Eurozone economy exhibited flat growth, recording 0% growth in the final quarter of last year, following a period of stagnation. According to revised data, the economy grew in line with preliminary estimates in the first quarter of this year, expanding by 0.1%, which was slightly below expectations of 0.2% growth.

Throughout the week, speeches by ECB officials, including President Lagarde today, will be closely monitored for potential signals on monetary policy decisions.