The S&P 500 continued to hit record highs, closing 0.6% up for the week; boosted by strong performance in the consumer discretionary and energy sectors which climbed 2.5% and 1.9% respectively. Energy was helped by rising oil prices, meanwhile, tech stocks faced a downturn in the week with major players such as Nvidia and Apple recording losses; 4% and 2.4% respectively. The Dow Jones Industrial Average closed the week up 1.5% and the Nasdaq Composite closed flat.
US economic indicators presented a mixed picture throughout the week. Retail sales increased 0.1% in May while sales at bars and restaurants as well as grocery stores both fell by 0.4%, indicating consumers were spending cautiously. Payrolls in the services sector recovered from two months of declines by increasing at their best pace in five months. Manufacturing signals were strong, with industrial production expanding just shy of 1% in the week, and reports showed that factories were operating at 79% of capacity. Treasury yields experienced positive performance with the 10-year note closing five basis points up at 4.26%.
European markets also experienced broad positive momentum in the week. The pan-European STOXX 600 closed the week 0.8% higher and the FTSE 100 climbed 1.1%. The Bank of England (BoE) kept interest rates unchanged at 5.25% with seven members of the committee voting to keep rates steady, while two members voted in favour of a cut to 5%. Headline inflation dropped to the BoE’s target of 2% in May, down from 2.3% in April. Both data points are positive signals that policymakers may be approaching a decision to cut rates. Norges Bank also kept rates unchanged at 4.5% while the Swiss National Bank cut rates by 0.25% to 1.25% - their second consecutive rate cut.
In contrast, Asian markets experienced weaker performance with Japan’s Nikkei 225 slipping 0.6%. The yen weakened further, approaching a 34-year low with the exchange rate sitting at JPY 158.8 against the USD versus 157.4 the previous week. The yen weakness helped to accelerate exports to the US and China which soared just shy of 14% year-over-year in May. In China, the Shanghai Composite recorded a loss of 1.1% and the Hang Seng fell 0.5%. Investors grappled with mixed economic data in the week with industrial production rising less than expected to 5.6% in May, and retail sales increasing more than expected to 3.7% in May. Adding to China’s housing market slump, new home prices fell their sharpest month-on-month contraction in almost a decade, down 0.7% in May.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest. Currency exchange rate fluctuations can also have a positive and negative affect on your investments. Please note that EFG Harris Allday does not provide tax advice. Past performance is not a reliable indicator of future performance.
This document has been produced by the EFG Harris Allday research team utilising data from documents produced by EFG Asset Management (UK) Limited for use by the EFG group and the worldwide subsidiaries and affiliates within the EFG group. EFG Asset Management (UK) Limited is authorised and regulated by the UK Financial Conduct Authority, registered no. 7389746. Registered address: EFG Asset Management (UK) Limited, Park House, 116 Park Street, London W1K 6AP, United Kingdom, telephone +44 (0)20 7491 9111.