Hello everyone! Bullish sentiment persists in markets into the start of June. Here’s a quick recap for you of what matters the most and drives markets currently.
Equity markets stories:
-> The markets ignored the massive wave of social unrest in US caused by the death of George Floyd, an afroamerican killed by a policeman.
-> The so called wall of worry kept climbing higher. As there’s still a lot of disbelief in the current rally, many investors keep buying into the stock market as volatility decreases, credit spreads improve and optimism around reopening of economies builds on. Top high-tech index Nasdaq100 even managed to make a new all-time high on Wednesday and break it on Friday to close the week at the highs.. The continuous improvement in sentiment can be depicted by the CNN Fear&Greed Index, which currently stands at 66.
-> On the corporate front EBay raised its sales and earning forecast. There were also new broker upgrades for some other major high-tech firms like Microsoft and Slack. The Covid-19 biggest losers like airlines, hotels, resorts and cruise lines kept outperforming the wide market:
-> On Thursday the ECB decided to further increase its Pandemic Emergency Purchase Programme (PEPP) to as much as EUR1.35 trillion (by EUR600 billion) and extended it in time to June 2021 or longer. Interest rates were left unchanged.
-> Additionally German chancellor Angela Merkel put forward another EUR130 billion package to support consumer spending and business investments.
-> The week ended with a massive rally in equities on Friday after the May US Paroll data showed a shocking 2.5m gain instead of an 8m loss and Unemployment Rate effectively fell to 13.3% vs. 19.8% expected.
-> Effective weekly index changes: S&P500 +4.9%, Nasdaq +3.4%, EuroStoxx600 +7.1%, DAX +10.9%%, Nikkei225 +4.5%.
Other markets events:
-> Bonds: US yield curve (10y-FF) edged higher to end the week at 76bps continuiing a bear steepening move (10Y Treasury Yield at 0.9% at end of week), German curve (10Y Bunds-3M) ended at 0.25% with 10Y Bunds at -0.28%, big drop again in peripherial EU yields after ECB decision on Thursday, High Yield Spreads also improved againcurrently at 5.8%.
-> Commodities (ex oil): big increase in risk-on sentiment caused fafe havens like Gold correct this week (-3.1%).
-> Oil: +10.3% on week in Oil (WTI) with economy geting back on track and markets coming roaring back.
-> Currencies: USD fell after ECB decision. DXY (Dollar Index) -1.4%, EURUSD +1.7%.
Major macro events: (times are CET):
Next Week’s major macro events:
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