Stock Markets

The major stock market indexes ended mixed for the week. The 30-stock Dow Jones Industrial Average (DJIA) rose by 0.72% while the DJ Total Stock Market fell by 1.68%. The broad S&P 500 Index likewise lost by 1.97% and the technology-heavy Nasdaq Stock Market Composite plunged by 3.65%. Mid-caps lost ground while small-caps gained. The NYSE Composite dipped by 0.54%. The CBOE Volatility Index (VIX), the indicator for investor risk perception, climbed by 32.58%.\

The week’s trading saw a continued rotation in market leadership to value shares and small-caps. The DJIA outperformed due to it being narrowly focused and comprised more of value stocks. The Nasdaq underperformed as it consists more of growth stocks in the technology sector. Late this week was also made memorable by the widespread global disruption of IT systems caused by an error in a vendor’s security update to major users of the Microsoft operating system. Although flights, banking services, and other institutions were disrupted, the financial markets were hardly impacted.  

The underperformance of growth stocks was affected by a sharp decline in chip stocks on Wednesday. News emerged that the Biden administration informed allies that it was considering curbing exports sharply if companies in their jurisdictions continued providing China with access to advanced semiconductor technology. Two of the companies alluded to were Tokyo Electron and ASML of the Netherlands. Stock prices of Taiwan Semiconductor Manufacturing, Broadcom, and NVIDIA (the third-largest company by market capitalization) plunged on the news.

U.S. Economy

Economic data released during the week generally surprised on the upside. Excluding volatile gas and auto segments, retail sales shot up by 0.8% in June, the most since January 2023 and well above the consensus estimate. Building permits also rose by more than expected, jumping by 3.4% in June. The Federal Reserve also reported on Wednesday the increase in industrial production by 0.6% in June, roughly twice the estimates. The Philadelphia Fed announced that its gauge of current regional business conditions surged to its highest in three years.

The outlier was the Labor Department’s report of weekly jobless claims, which indicated that the number of Americans filing for unemployment increasing to 243,000. The figure rebounded to the nine-month high that it set for the week ended June 8. A 20,000 increase in continuing claims to 1,867,000, the highest number since November 2021, appears to be of greater concern.

Metals and Mining

The political climate in the US is heating up as November elections draw near. After the assassination attempt on Republican Party nominee Donald Trump one week ago and turmoil within the opposing Democrat party, analysts believe that his chances of reclaiming the presidency have greatly increased. This has prompted experts such as Thorsten Polleit, Honorary Professor of Economics at the University of Bayreuth, to forecast that gold prices are poised to rise, possibly by 10% to 15%, by this time next year. Currency and commodity analyst Arslan Ali at FX Empire noted that Trump’s policy stance may be potentially inflationary, weakening the dollar and enhancing the attraction of gold as a safe-haven asset. In any case, investors expect a 90% chance that the Federal Reserve will cut interest rates in September creating tailwinds for gold.

Spot prices of precious metals are down for the week. Gold closed at $2,400.83 per troy ounce, 0.44% lower than its close last week at $2,411.43. Silver ended at $29.22 per troy ounce, 5.10% below last week’s close at $30.79. Platinum settled at $965.95 per troy ounce, 3.78% below its close last week at $1,003.92. Palladium last traded at $910.05 per troy ounce, 6.35% down from its closing price last week of $971.77. The three-month LME prices of industrial metals also ended lower for the week. Copper came from $9,786.50 last week to end at $9,386.00 per metric ton this week for a 4.09% loss. Aluminum slid from its close last week at $2,476.50 to its close this week at $2,385.00 per metric ton, coming down by 3.69%. Zinc, which ended last week at $2,959.00, closed this week at $2,809.00 per metric ton, a loss of 5.07%. Tin, which closed last week at $34,666.00, ended this week at $31,604.00 per metric ton for a loss of 8.83%.

Energy and Oil

Disappointment in China’s outlook has offset the consistent stream of positive news for oil from the United States despite the largely unexpected 5-million-barrel drop in US crude stocks. Hardly any tangible pledges were seen by the Third Plenum of China’s Central Committee, with the lack of constructive takeaways across commodities. Meanwhile, shrinking stocks in the delivery point of WTI in Cushing fell to their lowest reading in three months, and the premium of front-month US crude futures over the M2 contract widened to its highest since October 2023, as high as $1.60 per barrel. Furthermore, the global IT outage disrupted Friday trading, prompting ICE Brent to close the week at around $85 per barrel.

Natural Gas

For the report week from Wednesday, July 10 to Wednesday, July 17, 2024, the Henry Hub spot price fell by $0.39 from $2.37 per million British thermal units (MMBtu) to $1.98/MMBtu. The last time the Henry Hub price fell below $2.00/MMBtu in July was in 2020 during the COVID-19 pandemic. Regarding Henry Hub futures, the price of the August 2024 NYMEX contract decreased by $0.294, from $2.329/MMBtu at the beginning of the report week to $2.035/MMBtu at the week’s end. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.175 to $2.827/MMBtu.

International natural gas futures price changes were mixed this week. The weekly average front-month futures prices of LNG cargoes in East Asia decreased by $0.12 to a weekly average of $12.28/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.04 to a weekly average of $10.16/MMBtu. In the week last year corresponding to this report week (beginning July 12 and ending July 19, 2023), the prices were $11.22/MMBtu in East Asia and $8.67/MMBtu at the TTF.

World Markets

European stocks lost some ground this week as the pan-European STOXX Europe 600 Index closed 2.68% lower in local currency terms amid rising trade tensions between China and the U.S. The major indexes in the Continent were also down. Italy’s FTSE MIB lost by 1.05%, France’s CAC 40 Index fell by 2.46%, and Germany’s DAX declined by 3.07%. The UK’s FTSE 100 Index gave back 1.18%. While the European Central Bank (ECB) was expected to reduce interest rates this second half of 2024, it has not yet happened as the central bank kept their rates unchanged at 3.75%. The ECB clarified that it will not commit to any rate path and will base its decisions on economic data. ECB President Christine Lagarde that a move in September is “wide open” and that risks to economic growth were “tilted to the downside.”  Industrial production in the euro area dropped in May by 0.6% sequentially, for the first time since January. Output dropped by 2.9% year-over-year, with the steepest declines registered in Germany, Italy, and France. In the UK, average earnings, excluding bonuses, grew by an annual 5.7% in the three months to May, remaining close to double the headline annual inflation which holds steady at 2% in June. The jobs market remains strong, sparking doubts that the Fed will announce a rate cut in August.

Japan stocks fell over the week. The Nikkei 225 Index lost by 2.7% while the broader TOPIX Index declined by 1.2%. Rising concerns about tighter U.S. restrictions on exporters of advanced semiconductor technology to China (including several Japanese chipmakers), weighed on technology stocks. The yield on the 10-year Japanese government bond dropped to 1.04%, from 1.06% at the end of the previous week, amid speculation about whether the Bank of Japan (BoJ) would hike interest rates at its meeting scheduled for July 30-31. The yen strengthened to about JPY 157.37 against the greenback, from JPY 157.91 during the previous week. The yen’s second successive weekly gain came after what is suspected to be recent yen-buying operations by the government. On the Japanese economy, inflation ticked up as the closely monitored core consumer price index (CPI) rose by 2.6% year-over-year in June, up from 2.5% year-on-year in May, but still short of a consensus estimate of 2,7%. The country’s economic fragility was underscored by the government reducing its gross domestic product growth forecast for the current fiscal year ending March 2025 to a 0.9% expansion, from a projected gain of 1.3% in January. The downgrade is largely due to sluggish domestic demand amid rising import costs resulting from the yen’s weakness, which in turn erodes the purchasing power of households.

China’s equities market climbed as investor sentiment was largely unmoved by weaker-than-anticipated economic growth in the second quarter. The Shanghai Composite Index rose by 0.37% for the week while the blue-chip CSI 300 advanced by 1.92%. Hong Kong’s benchmark Hang Seng Index fell back by 4.79%. The country’s gross domestic product grew slower than expected at 4.7% in the second quarter year-on-year, slowing down from the first quarter’s 5.3% growth. The economy grew by 0.7% on a quarterly basis, which is less than half of the first quarter’s revised 1.5% expansion. The weakness in the economy was highlighted by other data. Year-on-year retail sales grew by 2%, which is slower than forecasted, and slower than the 3.7% increase in May. This was partly due to lower sales of autos and household appliances. A bright light is that industrial production rose by a better-than-expected 5.3% in June from one year ago, but it was slower than May’s 5.6% rise. China’s new home prices dipped by 0.7% in June, the same as May’s 0.7% drop and extending losses for the 12^th consecutive month. The data suggests that the major property rescue package rolled out by Beijing in May had little impact in turning around the property market slump that has become the greatest hindrance to China’s economic recovery.

The Week Ahead

The second quarter GDP and PCE inflation data for June are among the important economic data scheduled for release in the coming week.

Key Topics to Watch

• Existing home sales for June
• New home sales for June
• GDP for Q2
• Initial jobless claims for July 20
• Durable-goods orders for June
• Durable-goods minus transportation for June
• Advanced U.S. trade balance in goods for June
• Advanced retail inventories for June
• Advanced wholesale inventories for June
• Personal income (nominal) for June
• Personal spending (nominal) for June
• PCE index for June
• PCE (year-over-year)
• Core PCE index for June
• Core PCE (year-over-year)
• Consumer sentiment (final) for July

Markets Index Wrap-Up

Stock Markets

The Dow Jones Industrial Average (DJIA), which consists of 30 stocks, inched up by 0.54% for the week, while the Dow Jones Total Stock Market Index jumped by 1.33%. The broad S&P 500 Index is up by 1.54% while the technology-heavy Nasdaq Stock Market Composite added 2.77% and outperformed all the other major indexes. The NYSE Composite is up by 0.50%, mirroring the DJIA. Investor risk perception as reflected by the CBOE Volatility Index (VIX) went up by 1.96% for the week. 

The S&P 500 continued to break into new highs despite the notably narrow market advance. Growth shares outperformed value stocks by 415 basis points, as measured by the Russell 1000 indexes, while the small- and mid-cap benchmarks registered losses. The Nasdaq Composite, which tracks technology (growth) stocks, closed this week 73.71% off its lows since the market turned and reversed its downtrend in mid- to late-2022, while the more value-oriented and narrowly focused DJIA had achieved half that increase, 32.79%. A major factor for investors to favor growth stocks was the expectation for lower interest rates, fed by weakening growth and easing inflation pressures.  This combination places a lower implied discount on future earnings. Volume was light this week partly due to the Independence Day Holiday when the markets were closed.

U.S. Economy

On Monday, the Institute for Supply Management (ISM) posted its lowest reading of manufacturing activity since February at 48,5, a level in contraction territory. A surprise contraction in construction activity was also signaled by a separate reading. More surprising is a report released on Wednesday showing a sharp downturn in the ISM’s gauge of current services sector activity. This metric plunged from 53.8 in May to 48.8 in June, a full five points into contraction territory. It is also the index’s lowest level since soon after the start of the pandemic lockdowns in early 2020. According to the survey respondents, the high gas prices and worries over elevated restaurant menu prices were weighing on consumers. The survey’s chief researcher and other observers hope, however, that the drop will eventually prove to be an anomaly. By comparison, S&P’s Global rival survey rose from 55.1 to 55.3, indicating continued expansion and even a slight acceleration.

The week’s important jobs data was similarly mixed on the health of the economy. The Labor Department’s JOLTS report revealed on Tuesday that job openings slightly increased to 8.14 million in May but the same statistic was downwardly revised to 7.9 million in April, the lowest level in more than three years. Likewise, the tally of private sector job growth by payroll processor ADP was released on Wednesday. The job tally fell more than expected, from 160,000 in May to 150,000 in June. Chief US Economist Blerina Uruçi noted that the JOLTS data showed both quits and hiring back to pre-pandemic levels, indicating sustained loosening in the labor market. Labor market cooling does not, however, signify weakness.

Metals and Mining

The precious metals market was up for the week. Gold, which ended at $2,326.75 last week, closed this week at $2,392.16 per troy ounce for an appreciation of 2.81%. Silver ended at $31.22 per troy ounce, higher by 7.14% over last week’s close at $29.14. Platinum came from $996.26 last week to end at $1,030.09 per troy ounce this week, an increase of 3.40%. Palladium was worth $977.10 last week but gained by 5.37% to settle at the closing price of $1,029.57 per troy ounce.  The three-month LME prices of base metals are also up during this week’s trading. Copper closed at $9,944.00 per metric ton, 4.50% higher than its close last week at $9,515.50. Aluminum ended the week at $2,535.50 per metric ton, 1.73% above last week’s closing price of $2,492.50. Zinc settled this week at $3,001.00 per metric ton, higher than the previous week’s close at $2,929.50 by 2.44%. Tin, which traded last week at $32,208.00, closed this week at $33,874.00 per metric ton, higher by 5.17%.

Energy and Oil

US markets were closed for the Independence Day Holiday thus market activity was relatively light. Hopes were instilled among investors that summer demand would not be that bad after all, as indicated by the triple combination of lower US crude, gasoline, and diesel inventories. Crude is set for another weekly gain with ICE Brend ending the week above $87 per barrel The bullish sentiment is driving the market amid increasing optimism for US interest rate cuts in September. In the meantime, in defiance of the White House snapback of sanctions, Venezuela increased its oil production last month to 922,000 barrels per day (b/d), up from 912,00 b/d in May, due to increasing activity in new drilling and well workovers.

Natural Gas

For the report week from Wednesday, June 19 to Wednesday, June 26, 2024, the Henry Hub spot price rose by $0.06 from $2.39 per million British thermal units (MMBtu) to $2.45/MMBtu. Regarding Henry Hub futures, the July 2024 NYMEX contract expired at the end of the report week at $2.628/MMBtu, down by $0.11.3 from the start of the week. The August 2024 NYMEX contract price decreased to $2.745/MMBtu, down by $10.9 from the start to the end of the report week. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.085 to $3.268/MMBtu.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.25 to a weekly average of $12.61/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.27 to a weekly average of $10.75/MMBtu. In the week last year corresponding to this report week (beginning June 21 and ending June 28, 2023), the prices were $11,96/MMBtu in East Asia and $10.72/MMBtu at the TTF.

World Markets

European stocks ended higher this week. The pan-European STOXX Europe 600 Index closed the week 1.01% higher in local currency terms. The favorable turn is attributable to the easing of political jitters as the far right in France failed to win an outright majority in the first round of legislative elections on June 30. In the UK, the Labour Party won the general elections on July 4 with a large majority. Major stock indexes in the region climbed. France’s CAC 40 surged by 2.62%, Italy’s FTSE MIB advanced by 2.51%, and Germany’s DAX added 1.32%. The UK’s FTSE 100 Index gained by 0.49%. In the last European Central Bank’s (ECB’s) annual retreat in Portugal, Christine Lagarde, ECB President, struck a more hawkish tone. According to Lagarde, Europe is “still facing several uncertainties regarding future inflation, especially in terms of how the nexus of profits, wages, and productivity will evolve and whether the economy will be hit by new supply-side shocks… It will take time for us to gather sufficient data to be certain that the risks of above-target inflation have passed.” The year-over-year change in consumer prices ticked lower in June to 2.5%, as a final estimate of eurozone inflation confirmed. A crucial services component, however, remains stubbornly high and reinforces the ECB’s cautious approach.

Japan’s stocks generally ended the week higher, and both its major stock indexes hit all-time highs during the week. The Nikkei 225 Index climbed 3.36% while the broader TOPIX Index gained 2.56% in local currency terms. The stellar performance of equities was in part propelled by the weakness in the yen, typically a tailwind for export-focused industries. Later in the week, the yen slightly recovered. Members of Japan’s biggest union group achieved an average wage increase of 5.1%, the largest increase in 33 years, based on data from the union group. The final wage increase statistic, which included more small businesses, came in at a 5.28% wage hike, highlighting the strong upward wage momentum. In May, household spending declined by 1.8% year-over-year, short of the consensus estimate of a 1% increase. Consumer spending slid by 0.3% compared with the consensus estimate for an increase of 0.5% month-over-month. The weak spending appeared to be dependent upon the weak yen, particularly for the demand for overseas package tours. A 3.1% decline in outlays for food year-on-year appeared to have been driven by rising prices.  

Chinese stocks fell due to the lackluster manufacturing data that heightened concerns about China’s slowing economy. Both the Shanghai Composite Index and the blue-chip CSI 300 recorded modest losses for the week. The Hong Kong benchmark Hang Seng Index rose by 0.46% during the holiday-shortened week. Markets in Hong Kong were closed on Mondy in commemoration of the Special Administrative Region Establishment Day.  Government data showed that China’s manufacturing sector shrank in June for the second consecutive month. As new orders and exports declined, the official manufacturing purchasing managers’ index (PMI) reached 49.5 in June, unchanged from May. Since the figure still missed the 50-mark threshold, the index remained in contraction. The nonmanufacturing PMI, which measures construction and services activity, registered 50.5 which, while expansionary, is below consensus estimates and down from 51.1 in May. On the other hand, the value of new home sales by China’s top 100 developers fell by 17% in June from last year, slowing down from a 34% decline in May. This data released by the China Real Estate Information Corp. raises hopes that the Chinese housing market, now on a downturn for its fourth consecutive year, may begin to gain traction after the government’s sweeping rescue package in May.

The Week Ahead

The CPI and PPI inflation data for June as well as a read on the preliminary consumer sentiment for July are among the important economic releases in the coming week.

Key Topics to Watch

• Consumer credit for May
• NFIB optimism index for June
• Fed Chairman Powell testimony to Senate (July 9)
• Wholesale inventories for May
• Fed Chairman Powell testimony to House (July 10)
• Initial jobless claims for July 6
• Consumer price index for June
• CPI year over year     
• Core CPI for June
• Core CPI year over year        
• St. Louis Fed President Alberto Musalem speaks (July 11)
• Monthly U.S. federal budget by June
• Producer price index for June
• PPI year over year     
• Core PPI by June
• Core PPI year over year        
• Consumer sentiment (prelim) July

Markets Index Wrap-Up

Stock Markets

In the week just ended, small-cap stocks and technology stocks outperformed in mostly quiet trading. According to the Wall Street Journal Markets report, the Dow Jones Industrial Average (DJIA), comprised of 30 stocks, lost 0.08% over the week. The Dow Jones U.S. Total Stock Market Index hardly changed with a small gain of 0.04%. The broad S&P 500 Index surprisingly mirrored the narrow DJIA, losing 0.08%, while the technology-tracking index, the Nasdaq Stock Market Composite, inched up by 0.24%. The NYSE Composite gained marginally by 0.17%. The CBOE Volatility Index (VIX), the indicator of investor risk perception, dipped by 5.76%.

Growth stocks outpaced value stocks as small-cap companies and information technology stocks performed best. Index provider FTSE Russell was due to rebalance its series of Russell indexes after the markets closed on Friday, The primary indexes in the Russell family include Russell 3000, 2500, 2000, 1000, Top 200, Top 50, and a host of other Indexes. So it is likely that some of the market activity during the week may have stemmed from positioning adjustments by investors tracking those indexes.

U.S. Economy

This week, news about the banking sector was featured in the headlines and drove a common benchmark for the industry, the KBW Bank Index, to a strong performance. Media reports announced that the Federal Reserve is considering significantly lighter additional capital requirements for banks than had originally been proposed by regulators in the wake of the banking crisis in March 2023. This positive news was followed by the Fed’s declaration that all 31 of the large U.S. banks assessed by the central bank in its latest round of stress testing remain above their minimum capital levels. This potentially allows the assessed banks to return capital to their shareholders in the form of dividends and buybacks.

The Bureau of Economic Analysis released on Friday morning the May data for the core personal consumption expenditures (PCE) price index. The core PCE index excludes food and energy prices and is the Fed’s preferred measure of inflation. This indicator rose by 0.1% from April. Markets welcomed the deceleration from April’s upwardly revised 0.3% rate as it may signal that the Fed rate cut may likely occur in September.

Metals and Mining

Gold continues to trade in the range between $2,300 to 2,350 for now, but the longer it stays within this narrow margin, the better consolidated this metal would be at this support level. Friday marked the close of the second quarter of 2024, and this is the third consecutive quarter that gold has established a new all-time quarterly closing price. Its close this week is higher than the end of the first quarter by more than 5%. On an annual basis, gold prices are up by a remarkable 21% from the end of the second quarter of last year. Gold’s long-term chart justifies the current extreme bullishness of many commodity analysts, and it is difficult to see a scenario where the current uptrend materially shifts. The price also has solid fundamental macroeconomic support that aligns with the clear technical uptrend.

The spot price of precious metals ended the week mixed. Gold ended at $2,326.75 per troy ounce,      0.21% higher than its close last week at $2,321.98. Silver, which ended last week at $29.55, closed this week at $29.14 per troy ounce for a decline of 1.39%. Platinum gained 0.14% from its closing price last week at $994.90 to end this week at $996.26 per troy ounce. Palladium ended the week at $977.10 per troy ounce, 2.33% higher than last week’s closing price of $54.81. The three-month LME prices of the base metals did not fare any better. Copper, which ended at $9,682.50 last week, closed at $9,515.50 per metric ton for a loss of 1.72%. Aluminum descended by 0.84% from last week’s closing price of $2,513.50 to end this week at $2,492.50 per metric ton. Zinc, which ended last week at $2,844.00, closed this week higher by 3.01% to close at $2,929.50 per metric ton. Tin last traded at $32,208.00 per metric ton this week, ending 1.42% lower from its last weekly close at $32,671.00.            

Energy and Oil

Attention of investors and analysts are currently fixated on the U.S. inflation data even as crude oil prices maintained their hot streak, ending this week with its third consecutive weekly gain. Slackening economic data from the U.S. in May were overshadowed by surging geopolitical tensions centered on Israel and Lebanon. Every day this week saw prices posting a small but steady rise. Brent is set to finish the week at $87 per barrel. Meanwhile, hedge funds and other money managers have expanded their exposure to Brent futures and options. In the week ending June 18, they have bought the equivalent of 69 million barrels, making this the fourth fastest week-on-week increase since 2013.

Natural Gas

For the report week beginning Wednesday, June 19, and ending Wednesday, June 26, 2024, the Henry Hub spot price rose by $0.06 from $2.39 per million British thermal units (MMBtu) to $2.45/MMBtu. Regarding Henry Hub futures, the July 2024 NYMEX contract expired at the end of the report week at $2.628/MMBtu, down by $0.113 for the week. The August 2024 NYMEX contract price decreased by $2.745/MMBtu, down by $0.109 from the beginning to the end of the week. The price of the 12-month strip averaging August 2024 through July 2025 futures contracts declined by $0.085 to $3.268/MMBtu.

Natural gas futures price changes in the international market were mixed for the report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.25 to a weekly average of $12.61/MMBtu.  Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.27 to a weekly average of $10.75/MMBtu. In the week last year corresponding to this report week (from June 21 to June 28, 2023), the prices were $11.96/MMBtu in East Asia and $10.72/MMBtu at the TTF.

World Markets

The European stock market was lackluster this week. The pan-European STOXX Europe 600 Index ended lower by 0.72% due to heightened political uncertainty in France ahead of the snap election called by President Emmanuel Macron. The major regional stock indexes were mixed. France’s CAC 40 Index lost by 1.96%, Italy’s FTSE MIB slipped by 0.46%, and Germany’s DAX climbed by 0.40%. The UK’s FTSE 100 Index slid by 0.89%. Inflation in June slowed in France and Spain as the prices of fuel and food continued to increase, albeit at a slower rate. In Spain, inflation dropped to 3.5% from just over a one-year high of 3.8%. The annual rate in France fell to 2.5% in June from 2.6%. The German economy has exhibited difficulty in overcoming stagnation, as highlighted by a rise in unemployment and an unexpected deterioration in business confidence. The jobless rate hit its highest level in just over three years at 6.0% in June from 5.9% in May. The Ifo Institute’s think tank’s business confidence indicator softened from 89.3 in May to 88.6 in June, attributable to worsening expectations in marketing and trade.

In Japan, stocks rose over the week. The Nikkei 225 Index gained 2.6% while the broader TOPIX Index added 3.1%, mainly due to the historic weakness in the yen continuing to support Japan’s export-heavy industries. The yen fell to around JPY 160.6 against the USD from its week-ago exchange rate of JPY 159.7 to USD 1, which is close to its lowest level in 38 years. Contrary to expectations that authorities would intervene to support the yen and halt its sharp decline, only verbal reassurance was issued from Finance Minister Shunichi Suzuki. On the economic front, attention was focused on the Tokyo-area core consumer price index reading for June. Inflation was seen to rise by 2.1% year-on-year which is higher than consensus estimates and an acceleration from the May inflation rate of 1.9%. The increase was attributed mainly to services inflation and the growing speculation about Bank of Japan (BoJ) policy normalization. The BoJ aims to achieve its 2.0% inflation target sustainably. Both retail sales and industrial production grew in May at a faster rate than was anticipated.

A light economic calendar and concerns that the economy was slowing curbed investors’ risk appetite and brought Chinese stocks down for the week. The Shanghai Composite Index and the blue-chip CSI 300 Index both declined slightly over the week. The Hong Kong benchmark Hang Seng Index declined by 1.5%.  In May, industrial profits at large companies ascended by 0.7% from a year earlier, but it is down from April’s 4% gain according to the National Bureau of Statistics. The year-on-year earnings improvement was attributed by analysts to higher commodity prices, which boosted profits for mining companies. The month-on-month decline, however, reflected sluggish consumption amid the country’s prolonged property downturn and persistent deflationary pressure. In the future, investors will be keen to watch out for China’s official purchasing managers’ index (scheduled for release on Sunday), followed by the private sector Caixin factory survey on July 1. Also contributing to the week’s declines is foreign selling, with global funds unloading about RMB 49.4 billion of onshore shares via trading links with Hong Kong in June through last Wednesday.

The Week Ahead

The ISM manufacturing PMI, jobless claims, and the nonfarm payrolls report for June are among the important economic releases scheduled in the coming week.

Key Topics to Watch

• S&P final U.S. manufacturing PMI for June
• Construction spending for May
• ISM manufacturing for June
• Federal Reserve Chair Jerome Powell speech in Portugal (July 2)
• Job openings for May
• Auto sales for June
• New York Fed President John Williams speech in Portugal (July 3)
• ADP employment for June
• Initial jobless claims for June 29
• U.S. trade deficit for May
• S&P final U.S. services PMI for June
• Factory orders for May
• ISM services for June
• Minutes of Fed’s June FOMC meeting            
• New York Fed President John Williams speech in India (July 5)
• U.S. employment report for June
• U.S. unemployment rate for June
• U.S. hourly wages for June
• Hourly wages year over year

Markets Index Wrap-Up

Stock Markets

The major stock indexes are mostly up over the shortened trading week (markets were closed on Wednesday for the Juneteenth holiday) although the gains are modest. The Dow Jones Industrial Average, a 30-stock index, closed 1.45% higher than last week, while the Dow Jones Total Stock Market Index closed higher by 0.63%. The broad S&P 500 ended 0.61% higher, not surprisingly mirroring the Total Stock Market Index. The technology-heavy Nasdaq Stock Market Composite underperformed the other major indexes by moving sideways this week, neither climbing nor dipping. The NYSE Composite gained 1.00% for the week. The CBOE Volatility Index (VIX), the indicator of investors’ risk perception, moved higher by 4.27%.

There were modest signs of market broadening and rotation as value stocks outperformed growth stocks and, as seen above, most of the major benchmarks did better than the technology-tracking Nasdaq Composite. On Friday, roughly $5.5 trillion in options related to indexes, individual stocks, and exchange-traded funds were set to expire, earning for that day the term “triple-witching day.” In the bond markets, the lackluster retail sales data released during the week appeared to push longer-term Treasury yields lower. Friday’s stronger S&P Global readings, however, provided some support to bring them up and end the week modestly higher. Tax-exempt municipal bond yields remained relatively steady for most of the week.

U.S. Economy

Economic news releases at the start of the week suggested that easing labor demand and dwindling savings are pushing consumers to adopt greater caution. The Commerce Department reported on Tuesday that retail sales increased only by 0.1% in May based on advanced estimates, while falling by a downwardly revised 0.2% in April. Sales at bars and restaurants notably fell by 0.4%. This metric in particular is signaling less discretionary spending, but sales of grocery stores also fell 0.4%. Since retail sales data are not adjusted for inflation, the latter figures on grocery store sales perhaps reflect recent price cuts in certain food categories.

Manufacturing data released this week were somewhat stronger. In a reversal of recent trends, the Federal Reserve announced that industrial production expanded by 0.9% in May. This is well above consensus expectations and the fastest pace in almost a year. Factories were also operating a tick above expectations and at the highest level since last November, at 78.7% of capacity. Data released later in the week suggest that the economy was stronger than the retail sales data indicated. S&P Global announced on Friday that its composite index of business activity had climbed to 54.6 in June based on preliminary data, its best level in two years. Figures above 50.0 indicate expansion. With payrolls increasing at the best pace in five months and rebounding from two months of declines, the services sector appeared to be in rather good shape. Other good news shows selling price pressures in the services sector were among the lowest recorded since the start of the pandemic. However, there appears to be some pressure on operating margins in this sector as service providers continue to face higher wage bills.

Metals and Mining

Gold continues to churn within a narrow range between $2,300 to $2,350 per ounce, causing some frustration among investors. This may be perceived as a helpful consolidation that shakes out short-term players and allows investors to focus on the broader landscape. Its sojourn above the $2,300 support comes after an impressive run that began in March and rallied to a record high above $2,450 per ounce. While momentum has currently stalled, the factors behind the rally remain intact, suggesting that the rally may resume after gains have been consolidated. The present geopolitical uncertainty is an opportune time for the market to digest the gains so far, particularly with the November elections on the horizon.   

The spot prices of precious metals closed mixed for this week. Gold closed at $2,321.98 per troy ounce, lower by 0.47% from last week’s closing price of $2,333.04.  Silver was unchanged, closing the week at $29.55 per troy ounce, same as last week. Platinum gained 3.50% over its closing price last week at $961.30 to end at $994.90 per troy ounce. Palladium ended this week at $954.81 per troy ounce, 6.78% higher than last week’s close of $894.16. The three-month LME prices of base metals also ended mixed. Copper closed at $9,682.50 per metric ton, lower by 0.61% from last week’s close at $9,741.50. Aluminum, which closed last week at $2,517.50, descended by 0.16% to end this week at $2,513.50 per metric ton. Zinc, on the other hand, closed at $2,844.00 per metric ton, 2.76% higher than its last weekly close at $2,767.50. Tin gained by 1.09% from last week’s closing price of $32,318.00 to its closing price this week at $32,671.00 per metric ton.

Energy and Oil

Several factors have come together to lift oil prices to their highest levels since early May. These include improving demand figures corroborated by shrinking crude and product inventories, the onset of hurricane season in the U.S., and more visible Chinese buying. Regarding the weather system in America, a storm system has recently made landfall in northeast Mexico, becoming the first named tropical storm of the 2024 Atlantic hurricane season. Tropical Storm Alberto brings heavy rains that are disrupting lightering operations in Corpus Christi and Beaumont. Furthermore, the dysfunctional Red Sea navigation has once again caught the attention of the market, with the Houthis shrinking another bulker this week, thereby exerting upward pressure on oil prices.

Natural Gas

For the report week beginning Wednesday, June 12, and ending Wednesday, June 19, the Henry Hub spot price rose by $0.58 from $2.22 per million British thermal units (MMBtu) to $2.80/MMBtu. Regarding Henry Hub futures, the price of the July 2024 NYMEX contract increased by $0.288, from $2.757/MMBtu at the start of the report week to $3.045/MMBtu at the week’s end. Before Tuesday, when the front-month futures price settled at $3.129/MMBtu, the front-month price had not been above $3.00/MMBtu since January. The price of the 12-month strip averaging July 2024 through June 2025 futures contracts climbed by $0.236 to $3.459/MMBtu.

This report week, international natural gas futures price changes were mixed. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.01 to a weekly average of $11.99/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.19 to a weekly average of $10.81/MMBtu. In the week last year corresponding to this report week (beginning June 7 and ending June 14, 2023), the prices were $9.29/MMBtu in East Asia and $10.40/MMBtu at the TTF.

World Markets

European stocks ended marginally higher this week, with the pan-European STOXX Europe 600 Index gaining by 0.79%.in local currency terms. The market rebound is seen as the result of abating worries about political uncertainty and the improving outlook of the monetary policy. Major stock indexes gained lost ground. Italy’s FTSE MIB surged by 1.67%, France’s CAC 40 Index gained by 1.67%, and Germany’s DAX climbed by 97%. The UK’s FTSE 100 put on 1.12%. In June, private security business activity in the eurozone slowed and performed short of expectations. Manufacturing contracted sharply while services lost momentum, according to purchasing managers’ surveys. According to preliminary figures compiled by S&P Global, the HCOB Composite Purchasing Managers’ Index (PMI), which combines activity in manufacturing and services, dropped from 52.2 in May to 50.8 in June, just a hairline above the 50.0 demarcation between expansion (above 50) and contraction (below 50). Overall business activity increased slightly, while the slowdown in the rate of expansion suggested weakness in manufacturing production. Meanwhile, a decrease in new orders in France caused output to contract for a second straight month.

Japan’s stock markets lost ground for this trading week. The Nikkei 225 Index fell by 0.6% while the broader TOPIX Index lost by 0.8%. The lackluster performance in the stock markets may be traced to uncertainty about the future trajectory of the monetary policy of the Bank of Japan (BoJ) which weighed on sentiment. As investors sought to digest data showing that inflation had speeded up in May and speculation grew rife that this may affect the BoJ’s decision about when to next raise interest rates, the yield on the 10-year Japanese government bond (JGB) rose from 0.93% in the preceding week to 0.97%, this week. Following a 2.2% uptick in April, the nationwide core consumer price index rose by 2.5% year-on-year in May, although this fell slightly short of consensus expectation for a 2.6% increase. In currencies, the yen softened to around JPY 158.8 against the USD from the week-ago JPY 157.4. The yen hovers near fresh 34-year lows as it continues to be weighed down by U.S.-Japan interest rate differentials. If speculative or excessive volatility materializes in the foreign exchange markets, Japanese authorities expressed their readiness to intervene and support the yen.

Chinese equities pulled back as investor sentiment was dampened by mixed economic news. The Shanghai Composite Index dropped by 1.14% even as the blue-chip CSI 300 slumped by 1.3%. The Hang Seng benchmark Hang Seng Index climbed by 0.48%. Industrial production advanced by a weaker-than-expected 5.6% in May compared to one year ago, slowing from the 6.7% April growth rate. In the calendar year to May, fixed asset investment grew by 4% compared with a year ago, but eased from the January to April period as real estate investment declined deepened. Retail sales increased by 3.7% in May year-on-year which exceeded consensus expectations and outpaced the 2.3% gain in April. The nationwide urban employment rate remained unchanged at 5%. China’s new home prices fell by 0.7% in May, accelerating from April’s 0.6% drop. According to the statistics bureau, this marks the deepest month-on-month contraction in almost a decade. This is the eleventh consecutive month that new home prices declined, and it comes after Beijing launched a historic rescue package in May intended to revive the property sector. The housing market slump remains a significant drag on the economy and analysts caution that the measures unveiled by the government may be insufficient to halt the further descent of the housing market slump.

The Week Ahead

The PCE inflation data, consumer confidence data, and new and pending home sales are among the important economic releases in the coming week.

Key Topics to Watch

• Fed Gov. Christopher Waller speech in Rome (June 24)
• Chicago Fed President Austan Goolsbee TV appearance (June 24)
• San Francisco Fed President Mary Daly speech (June 24)
• Fed Gov. Michelle Bowman speech in London (June 25)
• S&P Case-Shiller home price index (20 cities) for April
• Consumer confidence for May
• Fed Gov. Lisa Cook speech (June 25)
• New home sales for May
• Initial jobless claims for June 22
• GDP (2nd revision) for First Quarter
• Durable-goods orders for May
• Durable-goods minus transportation for May
• Pending home sales for May
• Richmond Fed President Tom Barkin speech in Paris (June 28)      
• Personal income (nominal) for May
• Personal spending (nominal) for May
• PCE index for May
• PCE (year-over-year)
• Core PCE index for May
• Core PCE (year-over-year)   
• Chicago Business Barometer (PMI) for June
• Consumer sentiment (final) for June
• Fed Gov. Michelle Bowman speech (June 28)

Markets Index Wrap-Up

Stock Markets

The major stock indexes ended mixed for the week. The 30-stock Dow Jones Industrial Average (DJIA) dipped by 0.54% while the Total Stock Market was up by 1.33%. The broad S&P 500 Index also closed up, this time by 1.58%, with its Mid Cap 400 and Small Cap 600 down but its Super Composite 1500 up. The technology-heavy Nasdaq Stock Market Composite significantly outperformed other indexes by closing 3.24% up, suggesting technology stocks surged while other sectors slumped. The NYSE Composite Index closed 0.94% down. There was a rise in risk perception among investors as the CBOE Volatility Index (VIX) rose by 3.60%.

The key indexes, S&P 500 Index and Nasdaq Composite, touched new highs for the week, but as noted from the preceding results, the market advance was extremely narrow for the second consecutive week. As if to underscore this fact, the equally-weighted version of the S&P 500 trails its more popular, capitalization-weighted counterpart by 215 basis points (2.15 percentage points). The outperformance of technology stocks and growth shares appears traceable to investor enthusiasm over the potential of artificial intelligence. The Russell indexes suggest that these stock segments are outpacing value stocks by the largest margin (461 basis points) since March 2023. The week was also marked by the shareholder approval of Tesla CEO Elon Musk’s approximately USD 48 billion pay package (in Tesla stock).

U.S. Economy

Another reason for growth shares to outperform may be the heartening inflation releases and falling interest rates. Both factors increase the theoretical value of the future earnings of growth companies. The Labor Department on Wednesday announced that headline consumer price index (CPI) inflation remained unchanged in May for the first time in almost two years. Core inflation (excluding volatile food and energy prices) rose by 0.2% which is slightly below expectations and a seven-month low. Year-over-year core inflation dipped to 3.4%, the lowest level since April 2021.

On Thursday, the producer price index (PPI) inflation was reported and, as with the CPI, was lower than expected. Though anticipated to have a slight increase, the PPI fell by 0.2%, thus defying expectations. Core PPI fell back to 2.3% year-over-year, thereby ending five consecutive months of increases. Import prices fell by 0.4% in May, their first decline in four months. The benign consumer inflation data seemed to have little impact on Federal Reserve policymakers. The scheduled policy meeting of the Fed was concluded on Wednesday, following which it released its quarterly summary of individual members’ economic projections. Median growth expectations remained unchanged, but expectations for core personal consumption expenditure (PCE) – the Fed’s preferred inflation metric – in 2024 rose from 2.4% to 2.8%.

Surprise jumps in weekly and continuing jobless claims also calmed inflation fears, but may have raised concerns about the overall economic health. About 242,000 Americans filed for unemployment over the week ended June 8, the most in almost a year. Over the week preceding, 1.82 million people filed at least two weeks of claims, the most since the week ended January 20 and the third-highest number over the past year.   

Metals and Mining

This week, data from the People’s Bank of China showed that it did not increase its reserves last month. This appears to mark an end to its 18-month shopping spree, spooking gold traders who have been relying on Chinese central bank buying. The yellow metal closed the week 1% above its critical support of $2,300. It does not seem likely that China is done buying gold, given all the geopolitical uncertainty around the world. In a world where the US. dollar faces growing competition as the world’s reserve currency, analysts say that gold will play a growing role in a multipolar currency world. This is because gold remains one of the most liquid monetary assets in global financial markets today. This week, the U.S. dollar appears to have assumed a diminished role in the world stage with the expiration of the petrodollar. For the past 50 years, the U.S. and Saudi Arabia abided by the trade agreement that all oil trade would be denominated in U.S. dollars, cementing the dollar’s status as the world’s reserve currency and ushering in an era of American prosperity. In exchange, the U.S. provided military support and protection to the KSA.

The spot prices of precious metals ended mixed for the week. Gold, which ended last week at $2,293.78, closed this week at $2,333.04 per troy ounce for a rise of 1.71%. Silver  climbed by 1.37% from its closing price last week of $29.15 to settle at $29.55 per troy ounce, Platinum ended this week at $961.30 per troy ounce, a decline of 0.67% from the last weekly trading price of $967.81. Palladium, which closed last week at $915.01, last traded this week at $894.16 per troy ounce for a decline of 2.28%. The three-month LME prices for industrial metals were also mixed. Copper, which closed last week at $9,762.50, ended this week at $9,741.50 per metric ton for a slide of 0.22%. Aluminum came down by 2.35% from last week’s close of $2,578.00 to settle at $2,517.50 per metric ton. Zinc ended the week at $2,767.50 per metric ton, 0.02% higher than last week’s close at $2,767.00. Tin climbed by 2.75% from its previous weekly close at $31,452.00 to close the week at $32,318.00 per metric ton.             

Energy and Oil

Oil markets are back their regular swings after several weeks of unpredictable see-sawing. The uncertainty introduced by distortionary factors was significant to the extent that the International Energy Agency (IEA) and OPEC have contrasting views and publicly argue about the future of oil demand. The IEA predicts a 2029 peak in global oil demand at 105.6 million barrels per day (b/d) and foresees a price slump in line with its forecast that global supply capacity will reach nearly 114 million b/d by the end of this decade. The OPEC calls this IEA report a “dangerous commentary,” stating that it does not see a peak in oil demand until 2045 at the soonest and that consumption will grow to a hefty 116 million b/d. To date, the Federal Reserve has still not announced with any certainty its forthcoming interest rate cuts, and there remain questions about the strength of summer gasoline demand.

Natural Gas

For the report week starting Wednesday, June 5, and ending Wednesday, June 12, the Henry Hub spot price climbed by $0.58, from $2.22 per million British thermal units (MMBtu) to $2.80/MMBtu. Regarding Henry Hub futures, the price of the July 2024 NYMEX contract increased by $0.288, from $2.757/MMBtu at the start of the report week to $3.045/MMBtu by the week’s end. Before Tuesday, when the front-month futures price settled at $3.129/MMBtu, the front-month price had not been above $3.00/MMBtu since January. The price of the 12-month strip averaging July 2024 through June 2025 futures contracts climbed $0.236 to $3.459/MMBtu

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by 1 cent to a weekly average of $11.99/MMBtu. Natural bas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.19 to a weekly average of $10.81/MMBtu. In the week last year corresponding to this report week (beginning June 7 and ending June 14, 2023), the prices were $9.29/MMBtu in East Asia and $10.40/MMBtu at the TTF.   

World Markets

The pan-European STOXX Europe 600 Index declined by 2.39% due to the political uncertainty that undermined confidence following the strong showing by far-right parties in the European Parliament elections held during the previous weekend. All of the major indexes succumbed to the fallout. Germany’s DAX fell by 2.99%, Italy’s MIB shed 5.76%, and France’s CAC 40 Index plunged by 6.23%. The UK’s FTSE 100 Index gave up 1.19%. The European Union elections showed a broad shift toward right-wing and far-right parties. Weighed down by political risk, the European markets began the week with uncertainty after French President Macron announced the holding of snap legislative elections later in June. There was little done to sway the mood, including comments from European Central Bank President Christine Lagarde confirming that restrictive monetary policy in Europe has not ended and that no further rate cuts are coming anytime soon. European equities generally ended the week further negatively inclined due to macro-updates that were released later in the week. Among the positive news, Euro trade data showed a surplus balance in April due to exports growth far exceeding imports. This was swamped, however, by negative news that industrial production fell unexpectedly in April, easing 0.1%, against a forecast 2% growth. The UK economy stagnated in April as falls in both production and construction output offset growth in services output.

Japan’s equities ended mixed for the week. The Nikkei 225 Index gained 0.3% while the broader TOPIX Index slumped 0.3%. The results of the June meeting held by the Bank of Japan (BoJ) were perceived as broadly dovish, which in turn lent support to the stock markets. In the fixed-income markets, the yield on the 10-year Japanese government bond (JGB) dipped from 0.98% (the previous week’s end) to 0.93%. The yen, which is already historically at its lows, further weakened over the week from JPY 156.6 to around JPY 157.5 against the USD. The BoJ announced that its monetary policy will remain unchanged and voted to scale back its JGB purchases, defying market expectations that the central bank would reduce its bond-buying this month. Japan’s GDP contracted by 1.8% on an annualized basis over the first quarter of the year, according to revised data. This is less than the initial estimates of 2.0% due largely to an upward revision in private inventories. The main contributors to the weakness of the GDP in the first quarter were the economic impact of the earthquake that hit Japan’s Noto peninsula in January and the suspension of some auto production.  On the inflation front, producer prices increased by 2.4% year-on-year in May. This reading exceeds market expectations of a 2.0% rise.

Chinese equities declined during this holiday-shortened week. (Markets in China were closed on Monday in celebration of the Dragon Boat Festival.) The Shanghai Composite Index slid by 0.61% and the blue-chip CSI 300 fell by 0.91%. Hong Kong’s benchmark Hang Seng Index plunged by 2.31%. In China’s inflation readings, the country’s consumer price index (CPI) rose by 0.3% in May from a year earlier and is still lower than expectations, unchanged from its rise in April. Core inflation (which excludes volatile food and energy costs) climbed by 0.6% which is slower than the 0.7% increase in April. The producer price index (PPI) fell by 1.4% year-on-year, declining for 20 consecutive months, but eased from a 2.5% drop in April. Factors that kept a lid on prices in China were weak consumer confidence and a protracted property sector slump which prevailed despite numerous measures adopted by Beijing to prop up the markets and the economy over the past year. Highlighting consumer caution in China was data from the Dragon Boat Festival. The Ministry of Culture and Tourism reported that over the three-day holiday, tourism revenue rose by 8.1% over the 2023 results but still lagged pre-pandemic levels. While it was encouraging to note that domestic traffic rose by 6.3% from last year, average spending per traveler, however, fell by 12.3% from 2019. Analysts expect Beijing to continue rolling out support to spur demand in light of the weak consumer sentiment dragging down the economy.

The Week Ahead

Retail sales data, housing starts, industrial production, and capacity utilization are among the important economic reports scheduled for release in the coming week.

Key Topics to Watch

• Empire State manufacturing survey for June
• Philadelphia Fed President Patrick Harker speech (June 17)
• Fed Governor Lisa Cook speech (June 17)
• U.S. retail sales for May
• Retail sales minus autos for May
• Industrial production for May
• Capacity utilization for May
• Business inventories for May
• Richmond Fed President Tom Barkin podcast interview (June 18)
• Fed Governor Adriana Kugler speech (June 18)
• Dallas Fed President Laurie Logan speech (June 18)
• Louis Fed President Alberto Musalem speech (June 18)
• Chicago Fed President Austan Goolsbee speech (June 18)
• Home builder confidence index for June
• Initial jobless claims for June 15
• U.S. current account for Q2
• Housing starts for May
• Building permits for May
• Philadelphia Fed manufacturing survey for June
• S&P flash U.S. services PMI for June
• S&P flash U.S. manufacturing PMI for June
• Existing home sales for May
• U.S. leading economic indicators for May

Markets Index Wrap-Up

Stock Markets

The main stock indexes ended mixed for this week with a slight gain at the end of the week. The Dow Jones Industrial Average (DJIA), comprised of 30 stocks, inched up 0.29% for the week, while the broad Total Stock Market Index moved slightly higher over last week’s close by 0.95%. Comparatively, the broad S&P 500 Index gained 1.32% for the week and the technology-tracking Nasdaq Stock Market Composite rose 2.38%. The NYSE Composite, on the contrary, slipped downward by 0.54%. The CBOE Volatility Index (VIX), the indicator of how risky investors perceive the market, is down by 5.42%.

The market activity showed that investors appeared to weigh contradictory data from the busy economic calendar this week. The S&P 500 Index and technology-heavy Nasdaq Composite reached record intraday highs, however, the smaller-cap indexes pulled back. Growth stocks outperformed value shares by the widest margin since early in the year as falling longer-term interest rates increased the notional value of future earnings. Some market participants felt that some of the market activity seems to emanate from the fast-growing artificial intelligence (AI) sector. News spread that the U.S. officials have slowed the issuing of licenses to chipmakers for AI chip sales to the Middle East and were opening antitrust investigations into Microsoft and NVIDIA over their dominance of AI.

U.S. Economy

The week began with some negative economic news that appeared to reignite worries among some investors about “stagflation,” where slowing growth coincides with high inflation. The gauge of manufacturing activity of the Institute for Supply Management (ISM), released on Monday, came out at 48,7. Since 50.0 is the border between expansion and contraction, the new reading confirmed that manufacturing activity had fallen further into contraction territory. On Tuesday, further bad news came in the form of the Labor Department report that job openings in April had slumped to their lowest levels (8.059 million) since February 2022. On the contrary, the number of Americans voluntarily leaving their jobs (the so-called quit rate), which is considered by many as a more reliable indicator of the strength of the labor market, exceeded expectations on the upside.

By midweek, the economic news releases had turned optimistic. The ISM’s services jumped to 53.9 in May, well above consensus expectations and reaching its highest level in nine months. The payroll processor ADP report, released on the same day, revealed its tally of private sector job gains, which fell to 152,000, the lowest level in four months. The two reports countered the stagflation narrative with a possible “Goldilocks” scenario of economic growth that was neither too hot (as to hike inflation) nor too cold (as to stall growth) in the perception of many investors. On Friday morning, the Labor Department’s official jobs report appeared to derail the narrative, but only temporarily. Employers added 272,000 jobs in May, well above expectations and the most since the year began, according to the Labor Department report’s broader tally of both private sector and government nonfarm jobs. The market’s reaction to the news may have been moderated by an unexpected rise in the unemployment rate to 4.0%, its highest level since January 2022.

Metals and Mining

In the gold market, black boxes traded only on the headlines rather than looking at the details in the broader landscape, resulting to significant hits on the market last Friday. Gold prices dropped more than 3.5% on a single day resulting in the biggest intra-day sellout since 2020. Analysts anticipate that this renewed selling pressure could see gold possibly testing support at $2.200 per ounce. The cause of the sell-down is that data from the People’s Bank of China revealed that the PBOC did not buy any gold last month. This led investors to surmise that China’s central bank will never buy another ounce of gold again, based on the reaction in the gold market. This appears to be ill-based, given that China has been buying gold for the last 18 months and a pause at this point is only to be expected.

Over the just-concluded trading week, the spot prices of precious metals underwent a technical correction. Gold dipped by 1.44%, from its close last week at $2,327.33 to its close this week at $2,293.78 per troy ounce. Silver, which finished last week at $30.41, closed this week at $29.15 per troy ounce to register a loss of 4.14%.  Platinum ended this week at $967.81 per troy ounce, 6.80% lower than last week’s closing price of $1,038.45. Palladium, which was last priced one week ago at $916.86, closed this week at $915.01 per troy ounce for a slight loss of 0.20%. The three-month LME prices of industrial metals also ended lower this week. Copper ended at $9,762.50 per metric ton, lower by 2.76% than the previous weekly close $10,040.00. Aluminum closed this week at $2,578.00 per metric ton, down by 2.81% from last week’s close of $2,652.50. Zinc ended this week at $2,767.00 per metric ton, 6.82% lower than last week’s closing price of $2,969.50.  Tin closed this week at $31,452.00 per metric ton, down by 4.81% than the metal’s previous weekly close of $33,042.00.       

Energy and Oil

After the Monday sell-off that caused WTI to plunge to $73 per barrel, the oil markets got their breach back. Saudi Arabia and Russia insisted that the gradual return of crude to the markets should be regarded as a positive signal rather than a bearish sign. Some macro upside to prices was provided by the interest rate cut of the European Central Bank, which has the effect of raising hopes for a potential Federal Reserve interest rate cut in September. In the U.S. market, the country could expedite the rate of replenishing the Strategic Petroleum Reserve, according to Energy Secretary Jennifer Granholm. This is timely as underground storage sites return from year-long maintenance and WTI remains below $79 per barrel. In the international scene, the energy ministers of Saudi Arabia, the UAE, and Russia defended the extension of OPEC+ production cuts in the third quarter. They lashed out at Goldman Sachs for calling the new deal “bearish” and said that, if needed, they could pause or reverse policy. 

Natural Gas

For the report week from Wednesday, May 29, to Wednesday, June 5, 2024, the Henry Hub spot price rose by $0.01 from $2.21 per million British thermal units (MMBtu) to $2.22/MMBtu. Concerning Henry Hub futures, the July 2024 NYMEX contract price increased to $2.757/MMBtu, up by $0.09 through the week. The price of the 12-month strip averaging July 2024 through June 2025 futures contracts also climbed by $0.09 to $3.223/MMBtu.

International natural gas futures price changes were mixed this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia decreased by $0.02 to a weekly average of $11.98/MMBtu. At the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, the price of natural gas futures for delivery increased by $0.14 to a weekly average of $11.00/MMBtu. In the week last year corresponding to this report week (for the week from May 31 to June 7, 2023), the prices were $9.25 /MMBtu in East Asia and $7.95/MMBtu at the TTF.

World Markets

European stocks moved higher for the week. The gains were achieved on the back of the interest rate cut implemented by the European Central Bank (ECB) on Thursday for the first time in five years. The pan-European STOXX Europe 600 Index closed higher by 1.04% in local currency terms. Major stock indexes recorded gains, with Italy’s FTSE MIB rising by 0.49%, Germany’s DAX gaining by 0.32%, and France’s CAC 40 Index tacking on 0.11%. The UK’s FTSE 100, on the other hand, descended by 0.36%. In line with expectations, the ECB reduced its deposit rate by a quarter point to 3.75%, but it stopped short of signaling that more rate cuts could follow. ECB President Christine Lagarde stated in a press conference that the central bank is not committing “to a particular rate path, despite the progress over recent quarters” and inflation will likely stay above target well into 1925. According to ECB forecasts, inflation will likely average 2.5% in 2024, an upward revision over the previous estimate of 2.3%. The average inflation estimated for 2025 was also revised upward from 2.0% to 2.2%, although the ECB’s average inflation estimate of 1.9% for 2026 remained unchanged.

Japan’s stock market saw generally mixed returns for the week. The Nikkei 225 Index ended 0.5% higher week-over-week, while the broader TOPIX Index fell by 0.6%. A headwind for Japanese exporters was posed by a tentative rally in the yen that strengthened to around JP 155 against the U.S. dollar from the prior week’s JPY 157. However, the country’s services sector continued to expand at a rapid pace in May as shown by the latest purchasing managers’ index data, further bolstering sentiment, Signs were also evident that private consumption could cease being a drag on growth as household spending increased year-on-year in April, the first increase in 14 months. In the fixed-income markets, the yield on the 10-year Japanese Government Bond (JGB) tracked U.S. Treasury yields lower as they fell from 1.07% at the end of the previous week to 0.98% at the end of this week. As a further shift away from its highly stimulative policy stance, the Bank of Japan (BoJ) is speculated to taper its bond buying at its next monetary policy meeting on June 13-14, allowing markets to drive rates more. While the BoJ is expected to keep interest rates unchanged at its June meeting, it could keep taking incremental tightening steps, based on the improving global growth and Japan’s inflation trends.

Chinese stocks retreated during the week despite data showing that the property sector may be improving. The Shanghai Composite Index descended by 1.15%, while the blue-chip CSI 300 Index declined by 0.16%. The Hong Kong benchmark Hang Seng Index climbed by 1.59%. According to China Real Estate Information Corporation, the value of new home sales by China’s top 100 developers rose by 11.5% in May, up from April’s 3.4% increase. In May, new home sales slumped by 33.6% from a year ago but eased from April’s 45% drop. The data lifted hopes that China’s four-hear-long property market downturn may begin to recover. In May, Beijing announced a rescue package to stabilize the struggling sector. Nevertheless, some analysts remain skeptical regarding the effectiveness of the measures, whether they will result in a sustainable housing recovery amid weak domestic demand. The private Caixin/S&P Global survey of manufacturing activity moved up to 51.7 in May from 51.4 in April, its seventh monthly expansion. The Caixin services purchasing managers’ index registered an above-consensus 54 in May, up from April’s 52.5. The private Caixin survey focuses on smaller and export-oriented firms. For this release, the results contrasted with official data the prior week showing that manufacturing activity unexpectedly contracted in May.

The Week Ahead

Among the import economic releases scheduled for the coming week are the CPI and PPI inflation data, import prices, and the FOMC meeting,

Key Topics to Watch

• NFIB optimism index for May
• Consumer price index for May
• CPI year over year     
• Core CPI for May
• Core CPI year over year        
• FOMC interest-rate decision 
• Monthly U.S. federal budget for May
• Fed Chair Jerome Powell press conference (June 12)
• Initial jobless claims for June 8
• Producer price index for May
• PPI year over year     
• Core PPI for May
• Core PPI year over year        
• Import price index for May
• Import price index minus fuel for May
• Consumer sentiment (prelim) for June

Markets Index Wrap-Up

Stock Markets

The major stock indexes lost ground over the shortened trading week. On Monday, markets were closed in commemoration of Memorial Day, and trading was resumed on Tuesday. The 30-stock Dow Jones Industrial Average (DJIA) withdrew by a modest 0.98% while the Total Stock Market Index fell by 0.58%. Mirroring the Total Stock Market, the broad S&P 500 Index slid by 0.51%, but the technology-heavy Nasdaq Stock Market Composite fell by twice as much, giving up 1.10%. the NYSE Composite slid marginally by 0.15%. The CBOE Volatility Index (VIX), an indicator of investor risk perception, rose by 8.30% for the week.

The last week’s underperformance nevertheless rounded out a month of gains. The Nasdaq Composite was particularly weak in last week’s trading, in part due to a sharp decline in cloud software provider Salesforce. The counter plummeted sharply after the release of its first-quarter revenues that missed consensus estimates. The week’s light economic calendar contributed to the difficulty in detecting the catalysts for the week’s moves. Economic releases were generally aligned with expectations, particularly the Commerce Department’s personal consumption expenditure (PCE) price index report which was released on Friday morning.

U.S. Economy

In the week’s economic news, Core PCE prices (excluding food and energy), which is generally considered the Federal Reserve’s preferred gauge for inflation, rose by 0.2% in April which is down slightly from the prior two months. The April reading seems to be an extension of the two months of calming inflation pressures after the 0.5% spike in January. “Supercore” inflation – PCE services excluding energy and housing – provided a more mixed picture, rising 0.3% which is slightly down from March but higher than February’s increase. The Case-Shiller index of housing prices in major U.S. cities was reported on Tuesday as having risen by 7.4% over the 12 months ended in March. This is its highest level since October 22. The impact of the continued increase in home prices and mortgage rates was seemingly reflected in a 5.7% fall in mortgage applications over the previous week, the biggest decline since February. Pending home sales in April also dropped by 7.7%, their biggest fall in more than three years and well below expectations.

Metals and Mining

The spot prices of precious metals were mixed for this week. Gold corrected by 0.28% from its close last week at $2,333.83 to end this week at $2,327.33 per troy ounce. Silver, which closed last week at $30.26, ended this week at $30.41 per troy ounce for a gain of 0.50%. Platinum gained 1.00% over its closing price last week of $1,028.15 to settle at $1,038.45 per troy ounce by this week’s end. Palladium closed this week at $916.86 per troy ounce, 5.33% lower than last week’s closing price of $968.44.  The three-month LME prices of industrial metals were generally lower. Copper closed at $10,040.00 per metric ton, 2.75% lower than its closing price last week of $10,324.00. Aluminum ended this week at $2,652.50 per metric ton, 0.36% lower than $2,662.00, last week’s closing price. Zinc, which closed last week at $3,057.00, lost 2.86% to close this week at $2,969.50 per metric ton. Tin corrected by 0.56% from last week’s close of $33,229.00 to finally settle at $33,042.00 per metric ton by the end of this week.

Energy and Oil

Typically, the Memorial Day holidays are a time for travel and vacations that trigger a momentary increase in gasoline consumption. This year, however, the holidays failed to drive an increase in fuel demand, which added further downward pressure to oil prices. Looming large over the summer months are concerns over this year’s consumption patterns that overshadow higher refinery runs in the U.S. Attention is focused on OPEC+ heading into the weekend as the group meets in Vienna. At $81 per barrel, Brent futures is headed for another weekly loss, prospects that are likely to disappoint the likes of Saudi Arabia or Russia. In further developments, India’s largest private refiner Reliance entered into a one-year contract with Russia’s Rosneft to buy at least 3 million barrels of oil, with Urals prices set at a $3 per barrel discount to Dubai, to be paid in Russian roubles rather than U.S. dollars.

Natural Gas

For the report week beginning Wednesday, May 22, to Wednesday, May 29, 2024, the Henry Hub spot price fell by $0.30 from $2.51 per million British thermal units (MMBtu) to $2.21/MMBtu.  Regarding the Henry Hub futures price, the June 2024 NYMEX contract expired at the end of the report week at $2.493/MMBtu, down $0.35 from the start of the week. The July 2024 NYMEX contract price decreased to $2.666/MMBtu, down $0.39 for the week, The price of the 12-month strip averaging July 2024 through June 2025 futures contracts declined by $0.24 to $3.129/MMBtu.

International natural gas futures prices increased over the report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.49 to a weekly average of $12.00/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid increased by $0,66 to a weekly average of $10.86/MMBtu.  By comparison, in the week last year corresponding to this report week (May 24 to May 31, 2023), the prices were $9.31/MMBtu in East Asia and $7.98/MMBtu at the TTF.

World Markets

European stocks slid marginally lower for the week on the back of hotter-than-expected eurozone inflation which increased uncertainty about policy easing by the European Central Bank (ECB) beyond June. The pan-European STOXX Europe 600 Index closed lower by 0.46%, while major indexes also ended weaker. Italy’s FTSE MIB moved sideways and ended flat, Germany’s DAX slid by 1.05%, and France’s CAC 40 Index declined by 1.26%. The UK’s FTSE 100 Index lost by 0.51%. The market-moving news this week was headline inflation in the eurozone which rose for the first time in five months. The year-over-year increase in consumer prices ticked up to 2.6% in May from 2.4% each in March and April. The measure of core inflation (excluding energy, food, alcohol, and tobacco prices, the more volatile components) increased from 2.7% to 2,9%. Despite the uptick in the inflation rate, the European Central Bank (ECB) Economist Philip Lane signaled that borrowing costs would likely be lowered at the June 6 meeting. The unemployment rate, on the other hand, descended to a record low of 6.4% in April from 6.5% in the preceding five months. There were 100,000 fewer unemployed people from the previous month, bringing the number of jobless people to 10,998,000.

Japanese equities were mixed for the week. The Nikkei 225 Index fell by 0.4% while the broader TOPIX Index gained 1.1%. The likelihood that the Federal Reserve may cut interest rates at least once before the end of the year was increased due to a downward revision to U.S. economic growth data. This development lent some support to risk appetite among global markets, including Japanese stocks. The prospect and likely timing of further monetary policy normalization by the Bank of Japan (BoJ) remained firmly in investors’ focus. The yield on the 10-year Japanese government bond (JGB) rose from 1.00% at the end of the preceding week to 1.07% at the end of this week, amid the continued uncertainty about the duration of time until the BoJ could next raise short-term interest rates. The central bank ended its negative interest rate policy in March. Nevertheless, the country’s monetary policy remains among the world’s most accommodative. In currencies, the yen softened to about JPY 157.3 against the U.S. dollar from around JPY 157 at the end of the preceding week. The yen continued to tread around 34-year lows while investors awaited data that may suggest how much authorities spent on currency intervention from April 26 to May 29. There is speculation that authorities stepped into the foreign exchange markets on two separate occasions late in the period to support the yen.

Chinese stocks were hardly changed after the release of unexpectedly weak manufacturing data that underscored growth headwinds in the economy. The Shanghai Composite Index was broadly flat. The blue-chip CSI 300, on the other hand, dipped by 0.6%. The Hong Kong benchmark Hang Seng Index plunged by 2.84%. The official manufacturing purchasing managers’ index (PMI) fell to a below-consensus level of 49.5 in May from 50.4 in April. The below-50 May reading is the first monthly contraction since February. The PMI’s subindexes for new orders and exports likewise fell. Construction and services activity which constitute the nonmanufacturing PMI dropped from 51.2 in April to a weaker-than-expected 51.1 in May amid slower construction growth. Conversely, profits at industrial firms advanced by 4% in April from one year ago, recovering from a decline of 3.5% in March, according to the National Bureau of Statistics. Analysts attribute April’s increase to heightened overseas demand as well as a push by government for domestic companies to upgrade their aging equipment. Although some pockets of weakness remain in China’s economy, as indicated by both manufacturing and services PMI readings, most economists are optimistic that China will meet its growth target of 5% for the year.

The Week Ahead

The May nonfarm payrolls report, the national trade deficit for April, and the ISM manufacturing PMI are among the important economic releases expected this week.

Key Topics to Watch

• S&P flash U.S. manufacturing PMI for May
• Construction spending for April
• ISM manufacturing for May
• Auto sales for May
• Factory orders for April
• Job openings for April
• ADP employment for May
• ISM services for May
• U.S. productivity (final revision) for the First Quarter
• U.S. trade deficit for April
• S&P flash U.S. services PMI for May
• Initial jobless claims for June 1
• Consumer credit for May
• Wholesale inventories for April
• U.S. employment report for May
• U.S. unemployment rate for May
• U.S. hourly wages for May
• Hourly wages year over year

Markets Index Wrap-Up

Stock Markets

Most stock indexes have fallen over the week, just ahead of the protracted Memorial Day weekend. The 30-stock Dow Jones Industrial Average (DJIA) came down by 2.33% while the Total Stock Market Index slipped by 0.15%. The NYSE Composite is also down by 1.51%. The broader major indexes have managed to chalk up a positive performance. The S&P 500 Index managed a modest gain of 0.03% despite the Mid Cap 400, Small Cap 600, and Super Composite 1500 components of the S&P 500 all ending down. The technology tracking Nasdaq Stock Market Composite also climbed, by 1.41%. The measure of investor risk perception, the CBOE Volatility Index (VIX), is only slightly down by 0.50%.

The different indexes exhibited widely divergent results for the week. This is the DJIA’s biggest weekly loss (-2.33%) since early April; on the other hand, the Nasdaq Composite continued to hit new record highs, while the S&P 500 Index was relatively flat. The Nasdaq’s stellar performance was due to the gain in shares of artificial intelligence chipmaker NVIDIA which is now the third-largest company in the S&P 500 by market capitalization, after Apple and Microsoft. Almost 90% of the S&P 500 counters closed lower on Thursday seemingly due to data suggesting a rebound in growth in May that, in turn, led to speculation that the Federal Reserve would move interest rate cuts further back. The uncertainties in the market appeared to have caused investors to exit their positions to avoid added risks that may materialize over the long holiday weekend.

U.S. Economy

According to the S&P Global report, its composite index of business activity jumped by a higher-than-expected 54.4 in May, its highest level in just over two years. This gave rise to concerns that the economy may be heating up, causing inflation to once more take off and force the Federal Reserve to postpone its planned interest rate cuts. The acceleration was more notable in the much larger services sector. Investors appeared to be especially concerned by the inflation data in the report. The notable increase in selling price inflation continues to signal modestly above target inflation, and the main impetus comes from manufacturing rather than services.

The rates of inflation for costs and selling prices are observably elevated, suggesting that the final stretch down to the 2% target will remain elusive. Friday’s release provides further evidence that the pace of economic growth might pick up in the second quarter. The Commerce Department noted that the indicator of business capital investment, namely the orders for durable goods excluding the volatile aircraft and defense orders, rose faster than expected at 0.3% in April after remaining almost unchanged over the first quarter. On the other hand, the sales of both existing and new homes in April, which were released on Wednesday and Thursday, respectively, failed to meet expectations.

Metals and Mining

A generational shift is taking over the marketplace, where central bank purchases are replacing investment demand as one of the most significant price drivers. Simultaneously, market influence from the East is overtaking the West as demand arises more from Asian buyers, in particular Chinese retail investors, who have a newfound appetite for gold. The shifting dynamics were highlighted in Incrementum AG’s annual comprehensive “In Gold We Trust” report. The report findings underscore the end of the Great Moderation (a period characterized by low inflation) and the onset of persistent inflation volatility. The new economic milieu strengthens gold’s role as a hedge against inflation and economic instability. The report reveals that central banks and emerging market economies are embracing new strategies that include gold as an important monetary asset, in contrast to the strategies of the West which focuses on monetary policy and opportunity costs of holding gold.

The spot prices of precious metals ended down for the week in what could be seen as a technical correction, given their recent stellar performance. Gold came down by 3.37% from its close last week at $2,415.22 to its close this week at $2,333.83 per troy ounce. Silver descended by 3.91% from its last trade one week ago at $31.49 to its last trade this week at $30.26 per troy ounce. Platinum declined by 5.28% from its closing price last week of $1,085.41 to its closing price this week at $1,028.15 per troy ounce. Palladium ended 4.30% lower from its price last week at $1,012.00 to its closing price this week of $968.44. The three-month LME prices of the industrial metals ended mixed for the week. Copper, which ended last week at $10,424.00, closed this week 0.96% lower to end at $10,324.00 per metric ton. Aluminum rose by 2.92% from its close last week at $2,586.50 to end this week at $2,662.00 per metric ton. Zinc rose by 3.28% from last week’s closing price of $2,960.00 to end this week at $3,057.00 per metric ton. Tin descended by 1.48% from its previous weekly close of $33,729.00 to this week’s close of $33,229.00 per metric ton.

Energy and Oil

For four consecutive days, oil prices have been declining as they were driven lower by the Federal Reserve’s reservation in committing to interest rate cuts this year, together with weak physical sentiment in the markets. Backwardation in both WTI and ICE Brent dropped to the lowest level seen this year. Some upside may be provided next week by notably improving U.S. gasoline demand and the OPEC+ meeting. However, Brent is unlikely to break out from its current trading range of $80-85 per barrel. In the meantime, in an effort by the White House to ease gasoline concerns, the U.S. Department of Energy is expected to release almost one million barrels of gasoline from the Northeast Gasoline Supply Reserve. The latter was created after Superstorm Sandy in 2014 and will soon be shut as part of President Biden’s March government funding package.

Natural Gas

For the report week from Wednesday, May 15 to Wednesday, May 22, 2024, the Henry Hub spot price advanced by $0.36 from $2.15 per million British thermal units (MMBtu) at the start of the report week to $2.51/MMBtu at the week’s end. This is the highest price at the Henry Hub since January of the current year and two cents lower than the 2023 annual average. Concerning the Henry Hub futures, the price of the June 2024 NYMEX contract increased by $0.426, from $2.416/MMBtu at the start of the week to $2.842/MMBtu at the week’s end. The price of the 12-month strip averaging June 2024 through May 2025 futures contracts rose by $0.277 to $3.326/MMBtu.

International natural gas futures prices rose this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia climbed by $1.04/MMBtu to a weekly average of $11.50/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, increased by $0.69 to a weekly average of $10.20/MMBtu.  In the week last year corresponding to this report week (from May 17 to May 24, 2023), the prices were $9.73/MMBtu in East Asia and $9.27/MMBtu at the TTF.  

World Markets

European stocks ended lower for the week, with the pan-European STOXX Europe 600 Index ending lower by 0.45%. Investors have expressed uncertainty about the pace of potential interest rate cuts this year. The major stock indexes in the region ended the week mixed. Germany’s DAX moved sideways, France’s CAC 40 Index slid by 0,89%, and Italy’s FTSE MIB declined by 3.57%. The UK’s FTSE 100 Index lost by 1.22%. The President of the European Central Bank (ECB) Christine Lagarde mentioned in an interview that there was a “strong likelihood” that the central bank would reduce interest rates in June, although she followed this up with “No predicament, no prescription, no commitment.” The decision to reduce rates depends upon whether the data reinforces the confidence that the 2% inflation rate target may be achieved in the medium term. On the economy, the first estimate of the eurozone composite purchasing managers’ index (PMI) for May registered a 12-month high of 52.3, up from 51.7 in April and therefore indicating expanding activity. While services remained firmly expansionary, manufacturing PMI remained in contractionary levels albeit improving slightly. Negotiated wages in the first quarter increased by 4.7% year-over-year, up from 4.5% in the last quarter of 2023.   

Japanese equities descended for the week. The Nikkei 225 Index fell by 0.36% while the broader TOPIX Index declined modestly. Earlier in the week, stocks were lifted by positive economic data releases and a glowing earnings update from giant U.S. chip manufacturer NVIDIA which helped support Japanese tech stocks. All gains were lost on Friday, however, due to Japanese indexes tracking Wall Street’s plunge after U.S. data shot down hopes for a U.S. interest rate cut anytime soon. For the Japanese bond markets, it was a notable week as 10-year government bond yields reached 1.0% for the first time in 11 years. Economic data released during the week indicated that Japanese manufacturing activity recovered in May and expanded for the first time in more than a year. The manufacturing PMI climbed up from 49.6 in April to 50.5 this month, crossing the 50.0 borderline from contraction to expansion. Conversely, the services PMI remained in expansion territory despite easing slightly from 54.3 in April to 53.6 in May. Regarding currencies, the Bank of Japan adopted a more hawkish tone in recent weeks to help jolt the yen from its prolonged slump. The yen is currently trading around 24-y/741ar lows and investors fear that this will undermine emerging Japanese inflation and the prospect of any wage increases. The yen closed softer for the week at around JPY 157 versus the USD.

Chinese stocks fell as optimism about Beijing’s latest measures to support its ailing property sector was offset by concerns that rates would remain elevated in the U.S. The Shanghai Composite Index came down by 2.07% while the blue-chip CSI 300 declined by 2.08%. The Hong Kong benchmark Hang Seng Index lost by 4.83%. A week ago, the People’s Bank of China (PBOC) announced an unprecedented rescue package for the languishing property sector as data showed no improvement in China’s housing crisis. One of the measures was a re-lending program that would extend RMB 300 billion in low-cost funds to a select group of state-owned banks to lend to local state-owned entities for buying unsold homes. The measure removes the nationwide floor level of mortgage rates and lowers the minimum down payment ratio for home purchasers. Most investors welcomed the plan, but some remained doubtful as to whether the measure will arrest the property slump which continues to remain a major factor weighing down on China’s economy. Regarding monetary policy, the central bank is expected to continue to loosen policy this year and possibly reduce its reserve requirement again following the surprise cut in January aimed at spurring demand.

The Week Ahead

Among the important economic releases scheduled for this week are the PCE inflation report, the retail and wholesale inventories release, and an assessment of consumer confidence for May.

Key Topics to Watch

• Cleveland Fed President Loretta Mester and Fed Gov. Michelle Bowman speak in Japan (May 28)
• S&P Case-Shiller home price index (20 cities) for March
• Minneapolis Fed President Neel Kashkari speaks (May 28)
• Consumer confidence for May
• Fed Gov. Lisa Cook and San Francisco Fed President Mary Daly speak (Mau 28)
• New York Fed President John Williams speaks (May 29)
• Fed Beige Book
• Atlanta Fed President Raphael Bostic speaks (May 29)
• Initial jobless claims for May 25
• GDP (first revision) for the First Quarter 
• Advanced U.S. trade balance in goods for April
• Advanced retail inventories for April
• Advanced wholesale inventories for April
• Pending home sales for April
• New York Fed President John Williams speaks (May 30)   
• Dallas Fed President Lorie Logan speaks (May 30)
• Personal income for April
• Personal spending for April
• PCE index for April
• PCE (year-over-year)
• Core PCE index for April
• Core PCE (year-over-year)   
• Chicago Business Barometer (PMI) for May

Markets Index Wrap-Up

Stock Markets

For the first time ever, the 30-stock Dow Jones Industrial Average (DJIA) penetrated the 40,000 level and closed above it. Major stock indexes were up slightly for the week. The DJIA is up by 1.24% while the Total Stock Market is up by 1.55%. As if to confirm the latter, the broad-based S&P 500 Index gained 1.54%. On the other hand, the technology-heavy Nasdaq Stock Market Composite outperformed by climbing 2.11%. The NYSE Composite Index climbed by 1.25%. The rally was across the board, with small, mid, and large-cap indexes advancing for the week. The risk perception indicator, the CBOE Volatility Index (VIX) came down by 4.46%.

The week was memorable not only for the DJIA, a narrow index but also for the S&P 500 Index and the Nasdaq Composite which are relatively broad. All three climbed to record highs during the week. This may be traced to fading inflation and interest rate concerns, the outperformance of growth stocks, and in part possibly the lower implied discount placed on future earnings. Wednesday’s release of the Labor Department’s April consumer price index (CPI) appeared to be the major factor that drove the week’s positive sentiment. The CPI came in at or slightly below expectations which boosted some hope that rate cuts may come soon.

U.S. Economy

The April CPI contrasted with the hotter-than-expected readings of the previous three months. Headline prices rose by 0.3% which is a tick below expectations, and core prices (which excludes food and energy) rose by 0.3% in line with expectations. Inflation was concentrated in service prices, particularly transportation services costs which rose by 11.2% over the past year and 0.9% over the month. Retail sales figures released on Thursday were bad news for the economy but good news for stocks and inflation. As reported by the Commerce Department, retail sales remained flat in April compared to the consensus estimate of a 0.4% gain. The Commerce Department also revised its estimate of March sales lower, from 0.7% to 0.6%. The evidence shows that consumers were pulling back on discretionary spending. Sales at restaurants and bars continued to moderate and even fell slightly when taking account of higher prices since retail sales data are not adjusted for inflation. Meanwhile, sales at non-store (mostly online) retailers fell by 1.2%. Overall, while inflation remains too high above the target of 2%, the latest data signals that consumer price pressures are gradually abating.

Metals and Mining

Silver cleared the $30 resistance level ended this week above $31 per ounce, its highest close in 11 years. Prices of the white metal were also up by 11% for the week, marking its best performance since early August 2020. But silver was not the only stellar performer. Gold performed strongly on Friday, apparently closing its consolidation period and ending the week above the $2,400-per-ounce resistance level. Expectations are growing that it will not be long before gold will test its new all-time high at $2,500 per ounce as it is exhibiting enough momentum for it. Among industrial metals, copper also ended the week at an all-time high, above $5 per pound. Investors find it encouraging that gold and silver are finally moving in a traditional manner. Despite the excitement caused by silver, investors defer to gold as the asset analysts recommend to watch as a safe-haven asset. Thus far, its enduring appeal is highlighted by the convergence of billionaires’ renewed interest, technical bullish patterns, cautious market sentiment, and evolving global dynamics. Analysts expect that this is just the start of the bull market for gold.

The spot prices of precious metals ended higher for the week. Gold ended at $2,415.22 per troy ounce, higher by 2.32% over last week’s close of $2,360.50. Silver closed at $31.49 per troy ounce, 11.75% higher than last week’s closing price of $28.18. Platinum last traded at $1,085.41 per troy ounce, 8.80% above last week’s ending at $997.63. Palladium closed at $1,012.00 per troy ounce, 3.26% higher than the previous week’s close at $980.03.  The three-month LME prices of industrial materials also ended above their closes last week. Copper gained 4.20% over its last price one week ago at $10,004.00 to end this week at $10,424.00 per metric ton. Aluminum gained 2.25% over last week’s close at $2,529.50 when it ended this week at $2,586.50 per metric ton. Zinc inched up by 1.01% from its last trading price of $2,930.50 one week ago to close this week at $2,960.00 per metric ton. Tin ended the week 5.10% higher than last week’s close of $32,093.00 to end this week at $33,729.00 per metric ton.

Energy and Oil

The price of crude continues to trend within a rather narrow range between $82 and $84 per barrel over this month. Brent futures continue to be rangebound despite this week’s improving macroeconomic outlook. Even so, sufficient support for a breakout next week may be provided by U.S. inflation slowing down to a monthly rate of 0.3% and a slight U.S. oil inventory drop. In the meantime, the International Energy Agency (IEA) lowered its crude oil demand forecast for 2024 to 1.06 million barrels per day (b/d), a reduction of $140,000 b/d. The new demand forecast is half of OPEC’s 2,25 million b/d call for this year and cited poor industrial activity and weaker diesel consumption.

Natural Gas

For the report week from Wednesday, May 8 to Wednesday, May 15, 2024, the Henry Hub spot price rose by $0.14, from $2.01 per million British thermal units (MMBtu) to $2.15/MMBtu. Regarding Henry Hub futures, the price of the June 2024 NYMEX contract increased by $0.229, from $2.187/MMBtu at the start of the report week to $2.416/MMBtu at the week’s end. The price of the 12-month strip averaging June 2024 through May 2025 futures contracts rose by $0.082 to $3.049/MMBtu.

International natural gas futures prices were mixed for this report week. The weekly average front-month futures prices for LNG cargoes in East Asia were the same week-over-week at a weekly average of $10.46/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, decreased by $0.27 to a weekly average of $9.50/MMBtu. By comparison, in the week last year corresponding to this week (the week from May 10 to May 17, 2023), the prices were $10.62/MMBtu in East Asia and $10.44/MMBtu at the TTF.

World Markets

The pan-European STOXX Europe 600 Index climbed during the week to hit a record high but came down to register a 0.42% gain for the week. Optimism about the extent to which monetary policy might ease this year appeared to have been cooled by cautious comments from members of the European Central Bank (ECB). Major stock indexes ended mixed. Italy’s FTSE MIB advanced by 2.14% while Germany’s DAX fell by 0.36% and France’s CAC 40 Index slid by 0.63%. The UK’s FTSE 100 Index ended with a modest decline. Policymakers at the European Central Bank (ECB) caution that while a rate cut is still likely in June, the path thereafter remains uncertain. This is due to current data not justifying another reduction in July because the disinflation process appears to have significantly slowed. Should the Federal Reserve further slow policy easing, this could further delay ECB moves to reverse rates, and therefore would not back a second rate cut in July. Industrial production rose for the second consecutive month in March, climbing by 0.6% sequentially. The stronger-than-expected figure, however, was attributed to a jump in Ireland’s output, a metric that has proven historically quite volatile.

Japan’s stock markets gained ground for the week. The Nikkei 225 Index advanced 1.5% while the broader TOPIX Index added 0.6%. The gains were realized against a backdrop of economic weakness and a range-bound yen on expectations of U.S. interest rate cuts. Meanwhile, tentative hawkishness overshadowed policy signals by the Bank of Japan (BoJ) which also launched Japanese government bond (JGB) yields modestly higher. Investors generally discounted the weaker-than-expected quarter gross domestic product report – a 2.0% annualized contraction on the previous three-month period – that was in part driven by the negative impact on growth of the earthquake that hit the Noto peninsula in January. Other areas of weakness include the suspension of some auto production activity, as well as capital expenditure and external demand. Conversely, some support was shored up by strength in public demand and private inventories. The range-bound yen (at approximately JPY 155 versus the USD) continues to languish at near-record lows despite expectations by investors that Japanese authorities may intervene to support the currency, something already suspected to have happened twice by market observers.

Chinese equities hardly reacted despite the unveiling of a historic rescue package by the central government last Friday. The package aimed to stabilize China’s ailing property sector, but its announcement resulted in the Shanghai Composite Index remaining broadly flat, although the blue-chip CSI 300 inched up by 0.32%. Hong Kong’s benchmark Hang Seng Index, on the other hand, gained by 3.11%. In the package, the People’s Bank of China (PBOC) reduced the minimum down payment ratio by 5% to 15% for first-time buyers and to 25% for second-home purchases to try to enhance demand for home purchases. The PBOC also announced that it would eliminate the nationwide floor level of mortgage rates and allow cities to decide what mortgage rates to charge. The PBOC said that under a so-called re-lending program, it would extend RMB 300 billion in low-cost funds to a select group of state-owned banks to lend to local state-owned entities for the purchase of unsold homes. Data showed no signs of a turnaround so far in China’s yearslong housing crisis despite past measures taken, thus the release of this unprecedented support package. According to the statistics bureau, new home prices fell by 0.6% month-on-month in April, the tenth straight monthly decline and the steepest drop since November 2014.

The Week Ahead

Data on home sales, initial jobless claims, and the S&P Global Manufacturing and Services PMI are among important economic releases scheduled for this week.

Key Topics to Watch

• Fed Chair Powell prerecorded commencement remarks (May 19)
• Fed Vice Chair for Supervision Michael Barr speaks (May 20)
• Fed Gov Christopher Waller gives welcoming remarks (May 20)
• Fed Vice Chair Philip Jefferson speaks (May 20)
• Fed Gov Christopher Waller speaks (May 21)
• Fed Vice Chair for Supervision Michael Barr speaks (May 21)
• Cleveland Fed President Loretta Mester, Atlanta Fed President Raphael Bostic and Boston Fed President Susan Collins speak together on panel (May 21)
• Existing home sales for April
• Minutes of Fed’s May FOMC meeting
• Initial jobless claims for May 18
• S&P flash U.S. services PMI for May
• S&P flash U.S. manufacturing PMI for May
• New home sales for April
• Atlanta Fed President Raphael Bostic speaks (May 23)
• Durable goods orders for April
• Durable goods minus transportation for April
• Fed Gov Christopher Waller speaks (May 23)
• Consumer sentiment (final) for May

Markets Index Wrap-Up