Stock Markets Take a Breather into the Weekend
Global stock markets and US indices in particular experienced a stellar week last week after being hit by a multitude of central bank and data updates, but they took a bit of a breather on Friday as they dropped off of high levels. The major US indices all closed the day in the red, but this was not entirely unexpected given the strong week they had seen, the Dow finished down 0.32%, the S&P down 0.37% and the Nasdaq took a bit more of a hit, closing 0.68% off. The dollar managed to pull back a small amount of the ground it lost after the FOMC, trading 0.2% higher into the weekend and US treasury yields ground higher, the benchmark 10-year up 4bps on the day to 3.77%. Oil also jumped with WTI up 1.6% and Brent closing up 1.2% on the day.
Markets Continue to Surge Despite Hawkish Central Banks
Markets have given a strong message to investors over the last couple of weeks and it is one of optimism despite central banks warning of more rate increases to come. Stock markets and risk trades continue to drive higher on the expectation that central banks will start to pull back on what has been unprecedented tightening regimes since covid. We have seen surprise hikes from the Bank of Canada and Reserve Bank of Australia in the last couple of weeks as well as the key pause from the Fed being caveated with warnings of more hikes to come. Concerns that recession indicators like inverted yield curves have yet to hit the market but some investors are seeing storm clouds on the horizon as they look at the second half of the year. The market seems more split than ever on which way things will turn in the next five and half months and this normally tends to bring us more volatility not less as we move forward. Watch this space closely!
Quiet Start to the Trading Week
It is set to be a very quiet start to the trading week on Monday as traders digest a plethora of fresh information in what was a chaotic past week’s action. There is a bank holiday in the US and very little to trouble the scorers on the macroeconomic calendar, the combination of which is usually an excellent excuse for traders to take their foot off the gas and reevaluate markets. Expect to see range-bound conditions for most of the day but bear in mind that it is in this circumstance that any impactful news can cause extended moves.
