Europe has failed to agree on a new package of sanctions against Russia. China will lift restrictions in Beijing and Shanghai

by JustForex

At the close of the stock market on Friday, the Dow Jones Index (US30) gained 1.76% (+5.79% for the week), and the S&P 500 Index (US500) added 2.47% (+6.09% for the week). The Technology Index NASDAQ (US100) jumped by 3.33% (+6.45% for the week). All three indices ended the week in the green territory. The latest economic data, and comments of the Fed officials contributed to the positivity. The Core PCE index, part of the Fed’s inflation measures, was 4.9% y/y in April versus 5.2% y/y in March. This is the first decline in the index in 17 months. When viewed in context with other measures of inflation, this may indicate that US inflation is slowing. This is a good sign that the Fed might not have to tighten monetary policy after the summer meetings. And that’s a positive for stock indices.

The stock markets in Europe rose last week following the positive sentiment on Wall Street. German DAX (DE30) gained 1.62% (+1.99% for the week), French CAC 40 (FR40) added 1.64% (+2.60% for the week), Spanish IBEX 35 (ES35) increased by 0.50% (+3.90% for the week), British FTSE 100 (UK100) added 0.27% (+2.65% for the week).

The European Union (EU) could not agree on a new package of sanctions (including an oil embargo) against Russia in response to Russia’s invasion of Ukraine.

ECB officials are discussing faster interest rate hikes. On the contrary, the US Federal Reserve plans to pause after the summer hikes, so interest rate differentials are now provoking a rise in the euro. According to analysts, if the US economic slowdown is not accompanied by similar weakness in Europe, it could lead to a significant recovery of the euro. Germany and Spain will release inflation data today, which will be an important indicator before the overall Eurozone inflation estimate tomorrow.

Hedge fund analysts forecast five interest rate hikes of 25 basis points from the Bank of England by December. On the other hand, forward prices reflect a gloomy long-term outlook, showing that the Bank of England will eventually cut rates in the next two years. At this point, there is a high probability that the UK economy will fall into recession in the next 12 months.

Oil prices are supported by expectations of higher demand as the US auto season begins and European countries negotiate a total ban on Russian crude oil. An easing of restrictions in China may also push quotes higher amid a rebound in demand on tight supply.

Asian markets traded flat last week. Japan’s Nikkei 225 (JP225) decreased by 0.78% for the week, Hong Kong’s Hang Seng (HK50) gained 0.43%, and Australia’s S&P/ASX 200 (AU200) was up 0.52%. China reported fewer COVID-19 cases in both Beijing and Shanghai, prompting the government to ease some restrictive measures to stimulate the economy.

The Japanese government has drafted a “grand design” and action plan for Prime Minister Fumio Kishida’s “new capitalism” initiative. The draft emphasizes the government’s active involvement in removing bottlenecks in reflecting the results of employee wage growth and business investment. It lists “people,” “science and technology,” “startups”, and “green and digital technology” as four key areas of investment.

At the end of the week, the biggest gainers in the commodities market were futures on natural gas (+7.73%), palladium (+6.56%), coffee (+5.86%), Brent oil (+5.55%), lumber (+5.01%), orange juice (+4.58%), WTI oil (+4.34%), and silver (+2.13%). Futures on cotton (-2.19%) and sugar (-1.5%) showed the biggest drop.

Main market quotes:

S&P 500 (F) (US500) 4,158.24 +100.40 (+2.47%)

Dow Jones (US30) 33,212.96 +575.77 (+1.76%)

DAX (DE40) 14,462.19 +230.90 (+1.62%)

FTSE 100 (UK100) 7,585.46 +20.54 (+0.27%)

USD Index 101.64 -0.19 (-0.19%)

• – Eurozone Spanish Consumer Price Index (m/m) at 10:00 (GMT+3);
• – Eurozone EU Leaders Summit at 13:00 (GMT+3);
• – Eurozone Germany Consumer Price Index (m/m) at 15:00 (GMT+3);
• – US FOMC Member Waller Speaks at 18:00 (GMT+3).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.