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

Stock Markets

Stocks are moving toward record highs albeit on light volumes, The 30-stock Dow Jones Industrial Average (DJIA) climbed by 2.16% for the week while the Dow Jones Total Stock Market advanced by 1.77%. The broad-based S&P 500 Index added 1.85% where midcaps climbed farther than small caps. Meanwhile, the technology-tracking Nasdaq Stock Market Composite gained by 1.14%, the NYSE Composite rose by 2.05%, and the Russell 1000, 2000, and 3,000 indexes all saw gains. The CBOE Volatility Index (VIX), which measures investor risk perception, declined by 6.97%. The quiet trading week found little impetus in a generally light economic calendar, although certain individual stocks moved in reaction to first-quarter earnings releases.

Corporate profits remain one of the most important determinants of long-term market returns. Last week, the S&P 500 extended its gains for the month and is now less than 1% off its record high. Over the past three weeks, the rebound was driven by a better-than-expected earnings season. Now the first-quarter earnings season is coming to an end, which signifies that the market will once more look to inflation data and Fed policies. Inflation and possible rate cuts by the Federal Reserve will continue to dominate the narrative across financial markets as participants continue to address a “higher-for-longer” interest rate environment.

U.S. Economy

Economic news was generally light throughout the week, except for the weekly jobless claims that were higher than expected and caused a market reaction. In the week ended the previous Wednesday, 231,000 claimed unemployment benefits, the highest level since August. In addition, continuing claims rose to 1.79 million, breaking a four-week downward streak. These developments were taken by investors and analysts as signs that the broader economy might be cooling. Friday appears to have brought confirmation of this. The University of Michigan reported that its preliminary index of consumer sentiment in May fell unexpectedly to 67.4, down from a final reading of 77.2 in April. This marks the indicator’s lowest level in six months. The survey’s chief researcher noted, “While consumers had been reserving judgment for the past few months, they now perceive negative developments on a number of dimensions.” The report surmised that consumers expressed concerns that unemployment, inflation, and interest rates were moving in an unfavorable direction in the year ahead.

Metals and Mining

The gold market saw a robust performance this week, which was mostly perceived by fund managers and market analysts as the continuation of official sector demand that may significantly dominate the marketplace for the foreseeable future. Emerging market central banks have been setting a record pace by purchasing more than 2,000 tons of gold in the last two years. Unlike developed market central banks, the emerging market economies have felt the need to diversify their sovereign debt holdings and exposure to the U.S. dollar. However, the buying pressure is not felt solely among central banks. According to the World Gold Council’s monthly central bank data, the State Oil Fund of the Republic of Azerbaijan bought three tons of gold over the first quarter of 2024. This is a revelation that sovereign wealth funds and other non-traditional players may drive demand in the gold market, which may have a significant impact on the price of the precious metal.

Spot prices of precious metals were firmly up for the week. Gold gained 2.55% over its close last week at $2,301.74 to end the week at $2,360.50 per troy ounce. Silver advanced by 6.10% from last week’s close at $26.56 to rest at this week’s closing price of $28.18 per troy ounce. Platinum registered a 4.20% gain to close this week at $997.63 per troy ounce from last week’s close at $957.44. Palladium ended the week higher by 3.76% from its close last week at $944.49 to its close this week at $980.03 per troy ounce. The three-month LME prices of industrial metals also did well in this week’s trading. Copper, which closed at $9,910.00 per metric ton this week, rose to $10,004.00 for a 0.95% gain. Aluminum, which ended at $2,551.50 last week, was last traded at $2,529.50 per metric ton this week, for a slight decline of 0.86%. Zinc, last priced at $2,903.00 a week ago, gained 0.95% this week to end at $2,930.50 per metric ton. Tin gained by 0.34% from its closing price last week at $31,983.00 to end this week at $32,093.00 per metric ton.

Energy and Oil

After several weeks of decline, oil prices are one more gaining upward traction. Some bullish sentiment is resulting from falling U.S. crude inventories and robust Chinese imports. China’s oil imports have climbed year-over-year to approximately 10.88 million barrels per day last month. This is a 5.5% increase compared to April 2023, with refinery activity boosted by improving manufacturing activity as well as high-flying activity during the Labour Day holiday. Since early April, Brent futures are poised to register their first weekly gain and are moving closer to $85 per barrel. This trend is further strengthened by Israel’s Rafah operation and the easing of the U.S. labor market where jobless claims were the highest in eight months.

Natural Gas

For the report week from Wednesday, May 1 to Wednesday, May 8, 2024, the Henry Hub spot price rose by $0.38 from $1.63 per million British thermal units (MMBtu) to $2.01/MMBtu. Regarding the Henry Hub futures, the price of the June 2024 NYMEX contract increased by $0.255, from $1.932/MMBtu at the start of the report week to $2.187/MMBtu by the week’s end. The price of the 12-month strip averaging June 2024 through May 2025 futures contracts rose by $0.087 to $2.967/MMBtu.

International natural gas futures prices rose during this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.16 to 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, increased by $0.70 to a weekly average of $9.77/MMBtu. In the week last year corresponding to this week (from May 3 to May 10, 2023), the prices were $11.28/MMBtu in East Asia and $11.61/MMBtu at the TTF.

World Markets

European equities gained positive territory over this trading week. The pan-European STOXX Europe 600 Index advanced by 3.01% higher in local currency terms, on better-than-expected corporate earnings. Also, a driving factor was increased optimism that major central banks would soon start cutting interest rates. Major stock indexes likewise surged. Italy’s FTSE MIB climbed by 3.06%, France’s CAC 40 Index added 3.29%, and Germany’s DAX advanced by 4.28%. The UK’s FTSE 100 Index gained 2.68% to a new record high. The UK economy expanded by 0.6%, much stronger than expected, in the first quarter of 2024. It technically exited the recession that began in the second half of 2023, according to a first estimate from the Office for National Statistics or ONS. The growth was supported by increases in production and an expansion in services. Furthermore, the Bank of England signaled that it is considering cutting interest rates in June. According to economists, a decision to lower borrowing costs in June is likely as long as the labor market and services inflation data in the next two months do not surprise significantly on the upside.

Japan’s equities suffered marginal losses, on the back of hints by Bank of Japan (BoJ) Governor Kazuo Ueda that the central bank could raise interest rates early. Japan’s Nikkei 225 Index and the broader TOPIX Index closed slightly lower this week over last week’s close. The BoJ may raise interest rates should there emerge upside risks to the price outlook, given that inflation may have become more susceptible to the effects of weakness in the yen. At present, U.S.-Japan interest rate differentials remain very high, prompting some observers to believe in the likelihood of another interest rate hike to support sustainable yen appreciation. Over the week, the yen fell to a high-JPY157 range versus the U.S. dollar, from a previous JPY 153. This was despite a common observation among market participants that authorities had recently intervened on two occasions in the foreign exchange markets to prop up the yen, as suggested by the accounts of the BoJ. The yield on the 10-year Japanese government bond closed the week broadly unchanged close to a six-month high at approximately 0.9%. Participants in BoJ’s April meeting were shown to be turning extremely hawkish. However, signs of weakness in economic data may delay these possible rate hikes. For instance, real (adjusted for inflation) wages fell 2.5% in March year-on-year, worse than the 1.8% drop in February.

China’s stock markets registered gains for the week, buoyed by hopes of economic recovery following holiday spending during the previous week’s Labor Day holiday. The Shanghai Composite Index advanced by 1.6% while the blue-chip CSI 300 rose by 1.72%. The Hong Kong benchmark Hang Seng Index shot up by 2.64%. Tourism revenue over the five-day holiday increased by 7.6% compared to the 2023 holiday and surpassed pre-pandemic levels, as shown by data from the Ministry of Culture and Tourism. Domestic revenue was also higher this year by 12.7%, and international trips picked up as well. Box-office sales were registered at RMB 1.53 billion which is approximately the same as last year. However, average spending per traveler declined by 11.5% from 2019, indicative of consumers remaining cautious about spending. Regarding trade, China’s exports rose by 1.5% in April from a year ago, higher than the 7.5% decline in March. While European shipments fell, exports to Southeast Asian nations improved, and sales to the U.S. remained roughly the same. Imports advanced by 8.4% in April which is better-than-expected, reversing the 1.9% decline in March. These importation changes were attributed by analysts to increased raw materials shipments rather than improved consumer demand. The overall trade surplus increased from $58.55 billion in March to $72.35 billion in April.  

The Week Ahead

Included among the important economic reports scheduled for release this week are CPI and PPI inflation results, retail sales data, and business inventories for March.

Key Topics to Watch

• Fed Vice Chair Philip Jefferson and Cleveland Fed President Loretta Mester together on panel (May 13)
• Producer price index for April
• PPI year-over-year
• Core PPI for April
• Core PPI year-over-year
• Fed Gov. Lisa Cook speaks (May 14)
• Fed Chair Jerome Powell speaks (May 14)
• Consumer price index for April
• CPI year-over-year
• Core CPI for April
• Core CPI year-over-year
• U.S. retail sales for April
• Retail sales minus autos for April
• Empire State manufacturing survey for May
• Home builder confidence index for May
• Business inventories for March
• Minneapolis Fed President Neel Kashkari speaks (May 15)
• Fed Gov. Michelle Bowman speaks (May 15)
• Initial jobless claims for May 11
• Philadelphia Fed manufacturing survey for May
• Housing starts for April
• Building permits for April
• Import price index for April
• Import price index minus fuel for April
• Industrial production for April
• Capacity utilization for April
• New York Fed President Williams speaks (April 16)
• Fed Vice Chair for Supervision Michael Barr testifies (April 16)
• Cleveland Fed President Loretta Mester speaks (April 16)
• Atlanta Fed President Raphael Bostic speaks (April 16)
• U.S. leading economic indicators for April
• Fed Governor Christopher Waller speaks (April 17)

Markets Index Wrap-Up

Stock Markets

Major indexes have all registered gains for the week as they continue their uptrend after a brief period of consolidation. The 30-stock Dow Jones Industrial Average (DJIA) added 1.14% while its Total Stock Market Index rose by 0.63%. The broad S&P 500 Index climbed by 0.55% with Midcap 400, Small Cap 600, and Super Composite 1500 chalking gains of 1.17%, 1.36%, and 0.60% respectively. The technology-heavy Nasdaq Stock Market Composite advanced by 1.43%, while the Russell 1000, 2000, and 3000 indexes all ended higher for the week, indicating that gains were broad among equities. The CBOE Volatility Index (VIX), an indicator of risk perception among investors, was down by 10.25% signifying growing optimism.

While the indexes ended generally higher, the trading week was volatile and featured a raft of economic and earnings data. The week was busy with first-quarter earnings reports, although a rebound in overall sentiment on the last trading day appeared to have been driven by a spillover positive reception to Apple’s earnings release after trading closed on Thursday. The company beat consensus revenue estimations, however, investors were further energized by Apple’s announcement that it would buy back USD 110 billion of its shares, the largest such repurchase in history.

U.S. Economy

Last week, the Federal Reserve held interest rates steady since inflation readings for 2024 reveal that growing inflation has not yet been solved. The Fed noted that conditions are not improving at a pace that supports a policy change anytime soon. Analysts feel that while the next Fed action will be to cut rates, it may occur much later in the year, or possibly in the next year. Another defining factor last week was news of developments in the labor market. Early in the week, labor cost data sparked concerns that inflation may prevail for a longer period. The Labor Department reported that employment costs rose by 1.2% in the first quarter, or at an annualized rate of nearly 5%, which was the fastest pace in a year and well above expectations. A separate report revealed that home prices rose in February at their fastest pace in eight months. Both reports contributed to a sharp fall in stock prices on Tuesday.

However, later in the week, the jobs report came in cooler than expected and allayed inflation worries while signaling employment conditions that remain supportive for consumers. The main driver of the end-of-week rally appears to be the nonfarm payrolls report released on Friday morning. It showed that employers added 175,000 jobs in April, which is the lowest number since November and less than consensus estimates. The lower figure may buoy optimism as it may be a sign that economic activity is cooling down and lowering inflation may soon follow. The report also indicated a surprise slowdown in monthly wage increases, from 0.3% in March to 0.2% in April. The year-over-year gain in wages slid to 3.9%, the slowest pace in almost two years. The unemployment rate climbed slightly to 3.9% while the average weekly hours worked also slowed modestly.

Metals and Mining

In what may be signs of a possibly fatigued market, traders took advantage of the recent rally to realize some profits and wait for further consolidation. The gold market manages to hold support above $2,300 per ounce, however, it closes this week with a slight loss. There is every indication that gold continues to consolidate after its massive $400 rally as sentiment normalizes. Focus once more shifts towards actions the Federal Reserve may take in its monetary policy and interest rates. Before the disappointing employment figures released last Friday, the Fed already signaled that it will not be reversing interest rates soon; this will limit the upside to the gold market in the short term. The consolidation period is not, however, entirely disadvantageous. It allows investors the chance to establish tactical positions at lower prices and avoid chasing the market when the rally resumes. Some major banks see the gold challenging new ceilings within the year. Goldman Sachs, for instance, sees prices rallying to $2,700 before the year ends.

The spot prices of precious metals ended the week mixed. Gold closed the week at $2,301.74 per troy ounce, down by 1.55% from its close last week at $2,337.96. Silver ended the week at $26.56 per troy ounce, lower from its close last week at $27.21 by 2.39%.        Platinum ended the week 4.41% higher than last week’s close at $917.04 to close this week at $957.44 per troy ounce.      Palladium came down by 1.43% from its closing price of $958.15 last week to end at $944.49 per troy ounce this week. Also closing mixed for the week were the three-month LME prices for industrial metals. Copper ended this week at $9,910.00 per metric ton, down by 0.56% from last week’s closing price of $9,965.50. Aluminum closed this week at $2,551.50 per metric ton, lower than last week’s closing price of $2,569.50 by 0.70%. Zinc ended the week at $2,903.00 per metric ton, which is higher than last week’s close at $2,844.00 by 2.07%. Tin, which closed last week at $32,411.00, last traded this week at $31,983.00 per metric ton, lower by 1.32%.

Energy and Oil

A notable drop in oil prices has been triggered by the disappointing money markets with more hotter-than-expected U.S. inflation data. The prognosis is aggravated by higher crude inventories and slackening geopolitical risk. For instance, on the heels of U.S. sanctions, demand for Venezuela’s heavy barrels cut this country’s oil exports by a whopping 38% month-over-month to a mere $545,000 barrels per day, prompting at least six VLCCs to leave Venezuela empty in recent weeks. Despite these factors, both WTI and Brent prices fell by more than $5 per barrel since last week. Neither was the sentiment boosted by falling middle distillate and gasoline cracks. It seems that only a high-impact supply distribution would be capable of breaking the bearish streak currently prevailing in the oil market.

Natural Gas

For the report week from Wednesday, April 24, to Wednesday, May 1, 2024, the Henry Hub spot price rose by $0.04 from $1.59 per million British thermal units (MMBtu) to $1.63/MMBtu. Regarding Henry Hub futures, the May 2024 NYMEX contract expired on Friday at $1.614/MMBtu, down by $0.04 from the beginning of the report week. The June 2024 NYMEX contract price descended to $1.932/MMBtu, down by $0.05 from the beginning to the end of the report week. The price of the 12-month strip averaging June 2024 through May 2025 futures contracts declined by $0.05 to $2.880/MMBtu.

International natural gas futures prices declined for this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia fell by $0.21 to a weekly average of $10.31/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 $0.30 to a weekly average of $9.07/MMBtu.  By comparison, in the week last year corresponding to this week (the week from April 26 to May 3, 2023), the prices were $11.54/MMBtu in East Asia and $12.32/MMBtu at the TTF.  

World Markets

In Europe, equities slightly lost some ground in the week just ended. The pan-European STOXX Europe 600 Index lost 0.48% in local currency terms. Amid mixed corporate earnings and uncertainty about the interest rate outlook after June, investors seem to exhibit greater caution in taking market positions. Major European stock indexes ended mixed. Losing ground were Italy’s FTSE MIB which declined by 1.81%, France’s CAC 40 Index which slid by 1.62%, and Germany’s DAX which fell by 0.88%. On the other hand, advancing by 0.90% was the UK’s FTSE 100 Index as it surged to a new high due to strength in the mining and energy stocks. There was a general decline in European government bond yields this week even as policymakers downplayed the growing concerns regarding future possible interest rate increases by major central banks. The yield on the German 10-year government bond dropped to 2.5%; likewise, the yield on the 10-year UK government bonds also eased. The first-quarter gross domestic product (GDP) report indicated that the economy grew faster than expected by expanding by 0.3% after it shrank 0.1% in the last quarter of 2023. The contraction for the last three months of 2023 was the result of a downward revision from 0.0%, which means that the Eurozone’s economy was in a technical recession during the second semester of 2023. Annual consumer price growth was steady in April at 2.4%. However, core inflation (excluding volatile components, namely energy and food prices) slowed from 2.9% to 2.7%.

Japanese stocks returned gains on the back of perceptions that the Japanese authorities had intervened in the foreign exchange markets twice during the week to prop up the yen. The Nikkei 225 Index rose by 0.8% while the broader TOPIX Index climbed by 1.6%. The likelihood that such interventions had taken place was suggested by changes in the Bank of Japan’s (BoJ’s) accounts. Authorities, however, avoided confirming having intervened to halt the historic slump of the currency. The yen strengthened to approximately JPY 153 versus the U.S. dollar, from about JPY 158 at the end of the week before. The yield on the 10-year Japanese government bond finished the week unchanged at 0.9%, near a six-month high, despite increased intraweek volatility. The markets are reacting to strong U.S. wage data that raised concerns that the Federal Reserve will maintain interest rates higher for longer. The BoJ lifted interest rates from negative territory in March for the first time in seven years. Many are thus anticipating two further rate hikes that are expected to occur within the coming year. Japan’s monetary policy remains among the most liberal in the world, and for the time being, financial conditions are expected to remain accommodative.

Markets in mainland China were closed from Wednesday for the Labor Day Holiday, and Chinese stocks rose during the shortened trading week on hopes that the government will ramp up support for the economy. The Shanghai Composite Index rose by 0.52% while the blue-chip CSI 300 inched up by 0.56%. In Hong Kong, its stock market benchmark Hang Seng Index ascended by 4.67%. The Hong Kong markets were also closed on Wednesday but reopened on Thursday. The mainland stock markets are scheduled to open on Monday, May 6. At its April meeting held on Tuesday, China’s 24-member Politburo, which is its top decision-making body, pledged to implement prudent monetary and fiscal support to shore up demand. According to government officials, China intends to make flexible use of monetary policy tools to restore growth. These tools include possible cuts to interest rates and the reserve requirement ratio, which sets the amount of cash that banks must set aside in reserve. In the economy, the official manufacturing Purchasing Managers’ Index (PMI) was better than expected (50.4 in April down from 50.8 in March) and marked a second consecutive monthly expansion. The nonmanufacturing PMI was 51.2 which was below consensus expectations, easing from 53 in March but remaining expansionary.  

The Week Ahead

Outstanding consumer credit data, the Michigan Consumer Sentiment Survey, and wholesale inventories are among the important economic releases in the coming week.

Key Topics to Watch

• Richmond Fed President Tom Barkin speaks (May 6)
• New York Fed President Williams speaks (May 6)
• Minneapolis Fed President Kashkari speaks (May 7)
• Consumer credit for March
• Wholesale inventories for March
• Fed Vice Chair Philip Jefferson speaks (May 8)
• Boston Fed President Susan Collins speaks (May 8)
• Fed Gov. Cook speaks (May 8)
• Initial jobless claims for May 4
• San Francisco Fed President Mary Daly speaks (May 9)
• Fed Governor Michelle Bowman speaks (Mau 10)
• Consumer sentiment (prelim) for May
• Chicago Fed President Austan Goolsbee speaks (May 10)
• Fed Vice Chair for Supervision Michael Barr speaks (May 10)
• Monthly U.S. federal budget for April

Markets Index Wrap-Up

Stock Markets

All major indexes are up this week. The Dow Jones Industrial Index (DJIA) inched up by 0.67% while the Dow Jones Total Stock Market Index climbed by 2.70% over last week, The S&P 500 Index also gained by 2.67% which mirrored the Total Stock Market Index; likewise, the S&P’ Small Cap 600, Mid Cap 400, and Super Composite 1500 components all recorded gains above 2%, indicating that the rally was across the board. The technology-heavy Nasdaq Stock Market Composite Index outperformed the broad indexes by registering a leap of 4.23%. The NYSE Composite rose by 1.74%, and the Russell 1000, 2000, and 3,000 Indexes all exceeded 2.60% gains. Risk perception among investors abated as indicated by the CBOE Volatility Index (VIX) which descended by 19.67%.

Most major equities benchmarks, including the S&P 500 Index, broke through a string of three consecutive weekly losses as investors became energized by the first-quarter earnings reporting season’s busiest week. Analysts were expecting overall earnings for the S&P 500 to have shot up by 3.7% in the first quarter year-on-year. According to FactSet, analysts anticipated as of the end of the week that “both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises” would be “above their 10-year averages.” Nasdaq’s overperformance this week can be partly attributed to strength in Apple and a late rebound in chipmaker NVIDIA. Late in the week, Google parent Alphabet surged in reaction to the announcement that its first-quarter earnings were better than expected and the company’s first dividend payment. On the other hand, Facebook parent Meta Platforms plunged (at one point wiping out nearly USD 200 billion in market value) after its CEO Mark Zuckerberg announced plans to continue spending heavily on artificial intelligence and similar technologies.

U.S. Economy

The week began with strong buying interest pushed by some downside surprises in economic data. On Tuesday, some poorer-than-expected economic reports were received as good news because they could mean reduced pressure on inflation and interest rates. U.S. manufacturing activity fell back into contraction territory in April, reported at 49.9 by S&P Global’s gauge, which is well below the expected 52.0. S&P Global’s gauge of services sector activity came in at 50.9, lower than the expected 52.0, although it remains expansionary.

On Thursday, more negative economic news was released which, this time around, elicited pessimistic reactions among investors. According to the Commerce Department, their advanced estimate of economic performance showed that GDP was expanding at an annualized rate of 1.6% which is well below the consensus estimate of 2.5%. It is also the slowest economic growth rate in almost two years. The causes were traced to a sharp slowdown in government spending, a widening trade deficit, and consumers reining in spending particularly on goods. Other data released on Wednesday indicated that businesses continued to increase capital spending in March albeit at a slower pace (0.3%) than in February (revised lower to 0.4%).

Thursday’s inflation data also triggered concerns of “stagflation” (rising prices simultaneous with flagging growth) taking place in the U.S. The Commerce Department reported that core personal consumption expenditure (core PCE which is less food and energy expenses) index rose at an annualized 3.7% during the first quarter. This is more than expected and well above both the 1.7% increase in the fourth quarter and the 2% long-term inflation target of the Federal Reserve.  

Metals and Mining

After chalking up months of impressive gains, it is somewhat expected for precious metals prices to give in to selling pressure and consolidate its gains, falling by more than 4% in the first two trading days of the week and giving up $100. While some are alarmed that gold saw its worst decline in nearly two years on Monday, a general assessment will point to the fact that despite falling by more than 4%, gold prices are still up by more than 17% from their highs in mid-February. The price action may look somewhat extreme, but it is still a healthy correction in a bullish uptrend. It is sensible for some profit-taking to take place as investors await the Federal Reserve’s guidance on monetary policy in the coming week, although it is safe to assume that the Fed will remain on hold through the summer and avoid adopting sudden changes until after the 2024 U.S. general elections in November.  

This week, the spot prices of precious metals were generally down. Gold fell by 2.26% from last week’s close of $2,391.93 to end this week at $2,337.96 per troy ounce. Silver declined by 5.36% from its closing price of $28.69 last week to settle at $27.21 per troy ounce. Platinum, which ended last week at $935.54, closed this week at $917.04 per troy ounce for a loss of 1.98%. Palladium descended by 7.10% from last week’s ending price of $1,031.38 to this week’s close at $958.15 per troy ounce. The three-month LME prices of industrial metals ended mixed. Copper closed at $9,965.50 per metric ton, 0.91% above its last weekly close of $9,876.00. Aluminum closed this week at $2,569.50 per metric ton, lower by 3.73% from its last weekly close of $2,669.00. Zinc ended this week at $2,844.00 per metric ton, down by 0.28% from last week’s closing price of $2,852.00.  Tin, which closed last week at $35,582.00, ended this week at $32,411.00 per metric ton, for a loss of 8.91%.

Energy and Oil

Oil prices have thus far failed to gain sufficient momentum to break out above the psychological resistance level of $90 per barrel, even if it is headed towards the first weekly gain since early April. Several factors have added some upside in the trading range, such as a higher-than-expected draw in U.S. crude inventories, a notable slowdown in U.S. manufacturing that triggered hopes of a June interest rate cut, and continuing tensions in the Middle East. Brent may be expected to continue trading around the $89 per barrel mark. In the meantime, Iraq promised to commit to OPEC+ limits following months of overproduction when the country overshot its quota by 200,000 barrels per day (b/d) during the first quarter. Regardless of the OPEC+ meeting outcome in early June, Iraq now pledges to cap its oil exports at 3.3 million b/d until the end of the year,

Natural Gas

For the report week from Wednesday, April 17 to Wednesday, April 24, 2024, the Henry Hub spot price rose by $0.09 from $1.50 per million British thermal units (MMBtu) to $1.59/MMBtu. Regarding Henry Hub futures, the price of the May 2024 NYMEX contract decreased by $0.059, from $1,712/MMBtu at the start of the report week to $1.653/MMBtu by the week’s end. The price of the 12-month strip averaging May 2024 through April 2025 futures contracts rose by $0.033 to $2.802/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 ascended by $0.32 to a weekly average of $10.51/MMBtu. Natural gas futures for delivery at the Title Transfer Facility (TTF) in the Netherlands, the most liquid natural gas market in Europe, declined by $0.35 to a weekly average of $9.38/MMBtu. For comparison, on the week last year corresponding to this week (beginning April 19 and ending April 26, 2023) the prices were $11.90/MMBtu in East Asia and $12.84 at the TTF.  

World Markets

In tandem with U.S. equities markets, the pan-European STOXX Europe 600 Index broke a three-week losing streak and gained 1.74% for the week, as sentiment was boosted by an easing of Middle East tensions and some encouraging corporate earnings results. Most major stock indexes likewise advanced. France’s CAC 40 Index climbed by 0.82%, Italy’s FTSE MIB added 0.97%, and Germany’s DAX surged by 2.39%. Climbing to fresh all-time highs was the UK’s FTSE 100 Index, ascending by 3.09%. European government bond yields shot up to their highest levels this year. Stronger than expected U.S. economic data suggested that inflation may prove sticky, raising expectations that the Federal Reserve would maintain interest rates higher for longer and force other major central banks to follow suit. The yield on the benchmark 10-year German government bond spiked briefly above the 2.6% level. Due to hawkish comments from some policymakers, it has become doubtful that the expected lowering of interest rates in June will materialize.  

Japan’s stock markets gained over the week. The Nikkei 225 Index as well as the broader TOPIX Index both gained by 2.3%. The Bank of Japan, (BoJ) at its April meeting kept its monetary policy unchanged, a dovish signal to most investors. However, the BoJ governor, Kazuo Ueda, suggested that in the second semester of this year, confidence to raise interest rates further is set to increase. In the fixed-income markets, the yield on the 10-year Japanese government bond rose to 0.91% from 0.84% in the previous week. The yen continues to weaken, and authorities have refrained from intervening despite intense speculation favoring such intervention. The yen weakened to about JPY 156.8 versus the U.S. dollar, from approximately 154.6 at the end of the previous week. On the other hand, the Tokyo-area core consumer price index (CPI) rose 1.6% year-on-year in April, down from 2.4% in March and lower than consensus expectations, suggesting that inflationary pressures are easing. Business confidence remains positive as the pace of hiring rose across the private sector, and expansion in activity may likely be sustained at least in the short term.

In China, as investors grew more optimistic about the economy, equities rose over the week. The Shanghai Composite Index moved up by 0.76% and the blue-chip CSI 300 gained by 1.2%. Hong Kong’s benchmark Hang Seng Index shot up by 8.8%. According to 15 economists polled by Bloomberg, China’s economy is poised to grow by 4.8% this year, higher than a median forecast of 4.6% last month. The country’s gross domestic product (GDP) grew by 5.3% in the first quarter year-over-year, which is above the consensus estimates and slightly faster than the 5.2% year-over-year expansion in the final quarter of 2023. Economists downgraded their inflation forecasts, however, as the economy continues to be dragged down by declining producer prices and a persistent property market slump.

The Week Ahead

The FOMC meeting, the nonfarm payrolls report, and consumer confidence data are among the important economic releases scheduled for the coming week.

Key Topics to Watch                  

• Employment cost index for the First Quarter
• S&P Case-Shiller home price index (20 cities) for February
• Chicago Business Barometer (PMI) for April
• Consumer confidence for April
• ADP employment for April
• Construction spending for March
• ISM manufacturing for April
• Job openings for March
• FOMC interest-rate decision
• Fed Chair Powell press conference
• Auto sales for April
• Initial jobless claims for April 27
• U.S. trade deficit for March
• U.S. productivity for the First Quarter
• U.S. unit-labor costs for the First Quarter
• Factory order for March
• U.S. employment report for April
• U.S. unemployment rate for April
• U.S. hourly wages for April
• Hourly wages year-over-year
• ISM services for April
• Chicago Fed President Austan Goolsbee speech
• New York Fed President John Williams speech

Markets Index Wrap-Up

Stock Markets

Most major stock indexes are down for the week, except for the 30-stock Dow Jones Industrial Index (DJIA) which gained a slim 0.01%. All broader indexes lost ground and incurred losses. The Dow Jones Total Stock Market plummeted by 3.07% while the broad S&P 500 Index lost 3.05%. The technology-heavy Nasdaq Stock Market Composite plunged even deeper by 5.52%, and the NYSE Composite slumped by 1.02%. The inventor risk-perception indicator CBOE Volatility Index (VIX) rose by 8.09% for the week, suggestive of the heightened volatility expected in the market.

This is the third consecutive week of broad losses as concerns continue to mount over tensions in the Middle East. Furthermore, fears that interest rates may remain “higher for longer” continue to weigh on investor sentiments. As rising rates placed a higher theoretical discount on future earnings, mega-cap technology shares lagged, as the plunge by the Nasdaq this week showed. Advanced chipmaker supplier ASML Holdings missed its first-quarter revenue target, and this fact appears to weigh on the sector and general optimism toward companies with artificial intelligence (AI)-related earnings.

Relief that Iran’s well-telegraphed retaliatory strike on Israel did not result in worst-case scenarios probably prompted more optimistic trading when the week began. However, when the Israeli war cabinet decided to retaliate “clearly and forcefully,” stock prices tumbled on Friday when Israel conducted strikes on air defense facilities in Iranian territory as well as on Iran-backed groups in Iran and Iraq.

U.S. Economy

Strong economic data that were released during the week seemed to increase concerns among investors that the Federal Reserve would push back interest rate cuts, previously hinted to take place in June, to instead take place in the fall, or worse, in 2025. The Commerce reported on Monday that retail sales rose by 0.7% in March, which is well above consensus expectation of about 0.3%. February’s gain was revised upward to 0.9%. Partly at work were rising gas prices (note, the data was not adjusted for inflation), but the robustness was broad-based and included healthy gains in discretionary categories like bars, restaurants, and online retailers. On the other hand, there were downward surprises in housing market data. These may have advanced fears of growing inflation by signaling further tightness in supply. These include housing starts and permits in March which came in well below expected volumes and declined from February, with housing starts falling to the lowest level in seven months. The level of existing home sales also declined, although it did so mostly in line with expectations, as the average 30-year mortgage rate climbed above 7% for the first time since December.

Metals and Mining

Despite the stellar performance of gold and silver, the spot prices of precious metals ended mixed. Gold ascended by 2.03% from its closing price last week at $2,344.37 to its closing price this week at $2,391.93 per troy ounce. Silver ended trading this week at $28.69 per troy ounce, 2.91% above last week’s close of $27.88. Platinum, which ended last week at $976.74, closed this week at $935.54 per troy ounce for a decline of 4.22%. Likewise, palladium fell by 2.00% from its week-ago closing price of $1,052.45 to this week’s close at $1,031.38 per troy ounce. The three-month LME prices of industrial metals ended mostly on the upside. Copper came from last week’s price of $9,457.50 to end this week at $9,876.00 per metric ton, chalking up a 4.43% increase. Aluminum climbed by 7.02% this week from last week’s close at $2,494.00 to end week at $2,669.00 per metric ton. Zinc ended this week at $2,852.00 per metric ton, 0.83% higher than last week’s close of $2,828.50. Tin, which last traded at $32,353.00 one week ago, ended this week at $35,582.00 per metric ton, for a gain of 9.98%.

Energy and Oil

Oil prices exhibited increased volatility in recent trading sessions, which was largely attributable to the heightened risks surrounding the Israel-Iran conflict. Brent prices ratcheted above $90 per barrel on initial reports of Israeli strikes on Iranian soil. They plunged back to $86 per barrel after Tehran dismissed any serious impacts that the strikes were alleged to have caused. Due to these most recent and pressing concerns, the reimposition of oil sanctions on Venezuela was foregone for the meantime by the market as the U.S. Department of State let its 6-month waiver to allow Venezuela to freely trade its crude expire. The Department of State claimed that President Maduro failed to fulfill his pre-election commitments and provided oil companies a 45-day grace period to wind down operations in the country.

Natural Gas

For the report week beginning Wednesday, April 10, to Wednesday, April 17, 2024, the Henry Hub spot price fell by $0.38 from $1.88 per million British thermal units (MMBtu) to $1.50/MMBtu. Regarding the Henry Hub futures, the price of the May 2024 NYMEX contract decreased by $0.173, from $1.885/MMBtu at the start of the report week to $1.712/MMBtu at the week’s end. The price of the 12-month strip averaging 2024 through April 2025 futures contracts declined by $0.059 to $2.769/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 increased by $0.62 to a weekly average of $10.19/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 $1.15/MMBtu to a weekly average of $9.73/MMBtu. For comparison, in the week last year corresponding to this report week (week beginning April 12 and ending April 19, 2023), the prices were $12.56/MMBtu in East Asia and $13.35/MMBtu at the TTF.

World Markets

European stocks traded lower this week as the pan-European STOXX Europe 600 Index closed lower by 1.18% than last week, due to rising tensions in the Middle East. The major indexes in the region were mixed. While France’s CAC 40 Index was little changed, Italy’s FTSE MIB rose by 0.47% and Germany’s DAX dipped by 1.08%. The UK’s FTSE 100 declined by 1.25%. The lackluster performance of UK stocks may be partly accounted for by the annual consumer price growth rate reported at 3.2%. This should have been cause for celebration since the inflation rate fell to its lowest level in two and a half years, but the reported slowdown fell short of expectations forecasted by analysts and the Bank of England (BoE). In the broader Europe, several European Central Bank (ECB) policymakers at the IMF meeting reiterated that the likely target date for lowering borrowing costs is in June, provided there were no further unexpected economic shocks. ECB leadership emphasized, however, that the policy should correspond to incoming economic data, such as oil prices which the ECB is monitoring “very closely.”

Japanese equities suffered a deep sell-down last week amid the rise in geopolitical tensions in the Middle East and the uncertainties attendant to them. The Nikkei 225 Index plunged by 6.2% while the broader TOPIX Index declined by 4.8%. Another contributor to the stock sell-off is concern that AI-related demand is waning sooner than expected. In fixed-income investing, the yield on the Japanese government bond closed the week broadly unchanged from the week before, at around 0.84%. The Bank of Japan (BoJ) Governor Kazuo Ueda reprised comments he has made before that a rate hike may be warranted should weakness in the yen exert significant upward pressure on inflation. Although speculation continues regarding potential intervention by Japanese authorities in the currency markets to prop up the yen, no such move was taken. The U.S., South Korean, and Japanese leaders nevertheless met to discuss current conditions in the foreign exchange markets, with a sharp focus addressing the sharp depreciation of the Japanese yen and the South Korean won.

After the economy expanded by more than expected during the last quarter, the Chinese stock market rallied. The Shanghai Composite Index climbed by 1.52% while the blue-chip CSI 300 added 1.89% for the week. The Hong Kong benchmark Hang Seng Index declined by 2.89% as investor sentiment was dampened by the escalating geopolitical tensions in the Middle East. China’s GDP grew by an above-consensus 5.3% year-on-year for the first quarter of this year, accelerating modestly from the 5.2% growth in last year’s fourth quarter. The economy grew by 1.6% on a quarterly basis, rising from the fourth quarter’s 1.4% expansion. Other data, though, provided a mixed picture of the economy. In March, industrial production grew by 4.5% from a year earlier, which is lower than expected. This is down from the 7% growth achieved in the January to February period. The retail sales for March expanded by a lower-than-expected rate of 3.1% from a year ago, due to seasonal factors such as the slowdown of catering and auto revenue after the Lunar New Year Holiday. Although property investment fell by 9.5% year-on-year, fixed asset investment rose by more than forecasted in the first quarter from a year ago.  

The Week Ahead

The first-quarter GDP report and the PCE inflation data are among the important economic releases to look forward to this week.

Key Topics to Watch

• S&P flash U.S. services PMI for April
• S&P flash U.S. manufacturing PMI for April
• New home sales for March
• Durable-goods orders for March
• Durable-goods minus transportation for March
• Gross Domestic Product (GDP) for the first quarter
• Initial jobless claims for April 20
• Advanced U.S. trade balance in goods for March
• Advanced retail inventories in March
• Advanced wholesale inventories in March
• Pending home sales in March
• Personal income (nominal) in March
• Personal spending (nominal)
• PCE index
• PCE (year-over-year)
• Core PCE index
• Core PCE (year-over-year)
• Consumer sentiment (final) for April

Markets Index Wrap-Up

Stock Markets

The major indexes this week all headed southward on the back of a hotter-than-expected inflation report and rising concerns of an impending Iranian retaliatory strike on Israel. The Dow Jones Industrial Average (DJIA), which tracks 30 large companies on the New York Stock Exchange and the Nasdaq, dipped by 2.37% from last week; the Dow Jones Total Stock Market did slightly better with a decline of only 1.71%. The broader S&P 500 Index fell by 1.55%, while the technology-tracking Nasdaq Stock Market Composite slid only by 0.45%. The NYSE Composite Index gave up 2.67%, while the Russell 2000 Index did worse than Russell 1000 or 3000, suggesting that small-cap stocks fell further than their large-cap counterparts.

Stocks pulled back towards the end of the week in reaction to reports that Iran was preparing to directly attack facilities on Israeli soil for the first time.  Oil prices jumped on the news because of the implications of possible oil supply disruptions. The U.S. dollar also rose since it is typically viewed as a “safe haven” in times of international turmoil. The CBOE volatility index (VIX), the indicator of investor risk perception, rose by 7.99% on heightened volatility expectations. This is the VIX’s highest level since November 2023.

U.S. Economy

In the wake of the higher-than-expected inflation report, futures markets began pricing in roughly a 20% chance of a rate cut at the Federal Reserve’s meeting in June versus roughly 50% before its release. Central bank officials had a busy week for commentary at which they appeared to confirm a change in their perspective following the CPI release. The latest data did not increase the confidence of Richmond Fed Chief Thomas Barkin in disinflation, according to him, while Boston Fed President Susan Collins remarked that the recent data argue against an imminent need to cut rates. The consumer inflation data helped drive the yield on the benchmark 10-year U.S. Treasury note to its highest intraday level since November before Treasuries rallied on Friday as investors pursued U.S. dollar-based assets.

Metals and Mining

Gold continued its unprecedented rally, and with it the rest of the precious and industrial metals markets. Gold saw an intra-day price swing of $98, with volatility coming second only to the December rally that pushed gold above $2,150 an ounce. Thereafter, gold consolidated above the $2,000-per-ounce level, with some investors expecting prices to correct to $1,950. But the consolidation held above $2,000 and broke out last month. The anticipation for a pullback thus makes this week’s price action exciting, with investors who missed the initial rally now expected to buy on dips, creating a latent demand. There is a clear consensus in the marketplace that this rally is far from over.

The spot prices of precious metals were up over the week. Gold gained 0.63% from its close last week at $2,329.75 to its close this week at $2,344.37 per troy ounce. Silver closed 1.46% higher than its last price a week ago of $27.48 to its last trading price this week of $27.88 per troy ounce. Platinum climbed by 4.96% from last week’s close at $930.56 to this week’s close at $976.74 per troy ounce. Palladium, which ended last week at $1,005.63, closed this week at $1,052.45 with a gain of 4.66%. The three-month LME prices of industrial metals also chalked up gains. Copper advanced by 1.05% from last week’s closing price of $9,359.00 to end this week at $9,457.50 per metric ton. Aluminum last traded this week at $2,494.00 per metric ton, which is 2.02% higher than its last trading price one week ago at $2,444.50. Zinc shot up by 6.92% from last week’s close at $2,645.50 to this week’s close at $2,828.50 per metric ton. Tin surged by 12.95% from its closing price last week at $28,643.00 to this week’s closing price of $32,353.00.

Energy and Oil

The recent oil price rally slowed down considerably over the week due to inventory builds in the U.S., higher-than-expected inflation numbers that would likely postpone any interest rate cuts by the Federal Reserve, and attempts by Iran to play down the risk of an attack on Israel. On Friday morning, Brent was trading above the $90-per-barrel level, leaving plenty of upside risk yet in the oil markets. In the meantime, OPEC lowered its 2024 supply forecast in its latest monthly report. OPEC kept its demand forecast for this year at 2.24 million barrels per day (b/d), however, it lowered non-OPEC liquids production growth in 2024 to 990,000 b/d. This revised figure is down by 70,000 b/d from the previous month’s outlook.  

Natural Gas

For the report week from Wednesday, April 3, to Wednesday, April 10, 2024, the Henry Hub spot price rose by $0.02, from $1.86 per million British thermal units (MMBtu) to $1.88/MMBtu. Regarding Henry Hub futures, the price of the May 2024 NYMEX contract increased by $0.044, from $1.841/MMBtu at the start of the report week to $1.885/MMBtu at the end of the week. The price of the 12-month strip averaging May 2024 through April 2025 futures contracts rose by $0.01 to $2.829/MMBtu.

International natural gas futures prices increased this report week. The weekly average front-month futures prices for liquefied natural gas (LNG) cargoes in East Asia increased by $0.06 to a weekly average of $9.57/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 $0.17 to a weekly average of $8.58/MMBtu. In the week last year that corresponds to this week (the week from April 5 to April 12, 2023), the prices were $12.61/MMBtu in East Asia and $13.84/MMBtu at the TTF.

World Markets

European stocks lost some of their value as investors factored in hawkish signals from the European Central Bank that key rates, which the markets expect to lower rates soon, will continue to be held steady for the meantime. The pan-European STOXX Europe 600 Index declined by 0.26% for the week in local currency terms. Major stock indexes followed the trend. France’s CAC 40 Index slid by 0.63%, Italy’s FTSE MIB lost 0.73%, and Germany’s DAX declined by 1.35%. On the contrary, the UK’s FTSE 100 Index defied gravity to end the week with a 1.07% gain. The supportive factor of the index is the weakness of the British pound relative to the U.S. dollar. Furthermore, the UK GDP expanded for two consecutive months suggesting that the country’s economy exited recession. The FTSE 100 includes many multinationals that generate meaningful overseas revenue denominated in dollar terms. Despite trending lower earlier in the week, the yields on German, Italian, and French government bonds jumped on news that U.S. inflation came in hotter than expected in March. Yields pulled back subsequently from these highs after the European Central Bank (ECB) held key rates steady while strongly hinting that they may soon be lowered.

Japanese equities rose over the week partly in reaction to the stronger-than-expected U.S. inflation report. The Nikkei 225 Index gained 1.4% and the broader TOPIX rose by 2.1%. Investors speculated as to whether Japan’s monetary authorities would intervene to support the yen as it hovered close to a 34-year low. Following a higher-than-expected U.S. inflation reading and subsequent increase in U.S. Treasury yields, the Japanese government bond yield rose to 0.84% from 0.77% at the end of the prior week. During the week, it briefly touched its highest level since November 2023. The finance ministry authorities stated that they were investigating the factors that prompted the currency moves and that they would act on excessive yen weakness. Bank of Japan (BoJ) Governor Kazuo Ueda, meanwhile, ruled out a rate hike in response to a weak yen. From his pronouncements, the central bank assured that it would not alter its monetary policy directly in response to exchange rate moves. Japan’s monetary policy remains one of the most accommodative in the world. Market expectations now appear to converge around two further rate hikes within the next 12 months.

Chinese stocks pulled back as weak inflation data drew attention to the lackluster demand permeating China’s economy. The Shanghai Composite Index declined by 1.62%, while the blue-chip CSI 300 fell by 2.58%. The Hang Seng Index, Hong Kong’s benchmark, experienced early gains in the week that were, however, pared by apprehensions about the flagging recovery. The country’s consumer price index rose by a below-consensus 0.1% in March year-on-year, down from 0.7% in February. The core inflation rose by 0.6% but was weaker than the 1.2% increase in February. The producer price index fell by 2.8% from last year. This is its 18^th month of declines and accelerating from its February 2.7% drop. China’s exports and imports fell in March, reversing the gains realized from January and February. Exports shrank by 7.5% year-on-year in March, which was worse than expected and accelerating from a 7.1% rise in the January-to-February period. These latest results dealt a setback to China’s reliance on external demand to bolster its economy. They added further pressure on Beijing to roll out additional stimulus measures to achieve its 5% annual growth target.

The Week Ahead

Retail sales data, housing starts, and leading economic indicators are among the important economic reports scheduled for release in the coming week.

Key Topics to Watch

• Dallas Fed President Lorie Logan speaks in Tokyo
• Empire State manufacturing survey for April
• U.S. retail sales for March
• Retail sales minus autos for March
• New York Fed President John Williams TV appearance (Monday, April 15)
• Business inventories for February
• Home builder confidence index for April
• San Francisco Fed President Mary Daly speaks
• Housing starts for March
• Building permits for March
• Fed Vice Chair Philip Jefferson speaks
• Industrial production for March
• Capacity utilization for March
• Fed Chair Jerome Powell speaks
• Fed Beige Book
• Cleveland Fed President Loretta Mester speaks
• Fed Governor Michelle Bowman speaks (Wednesday, April 17)
• Initial jobless claims
• Philadelphia Fed manufacturing survey
• Fed Govern0or Michelle Bowman speaks (Thursday, April 18)
• New York Fed President John Williams speaks (Thursday, April 18)
• Existing home sales for March
• U.S. leading economic indicators for March
• Atlanta Fed President Raphael Bostic speaks (11 a,m., Thursday, April 18)
• Atlanta Fed President Raphael Bostic speaks (5.45 p,m., Thursday, April 18)
• Chicago Fed President Austan Goolsbee speaks

Markets Index Wrap-Up