Our view on the market movements for last week and outlook for week commencing 10 June.
Weekly review & outlook: Trade tensions continue
The start of the week saw the negative tone from the previous week, and in fact the month of May, continue as global stock markets were still reeling from the ratcheting up of trade tensions led by the US president. Economist’s concerns of these tensions showing up in global economic activity indicators is becoming increasingly evident.
Industrial and manufacturing sector PMI figures in major economies released during the week continued to show a moderation in business confidence, although the services sector bucked the trend. In the UK, manufacturing and construction sector PMIs both showed contraction, although the Brexit situation is partly an explaining factor rather than just a global slowdown.
However, the gathering view of a global slowdown implies that central banks will step in. We had the Federal Reserve’s Beige Book survey highlighting increasing concerns going forward of the impact of tariffs especially from the US manufacturing sector. Meanwhile the ECB kept its interest rates on hold but markets are increasingly of the view that central banks are more likely to reverse rate hikes, according to the futures market there is now a 98% probability the US central bank will cut theirs by the end of the year. This lifted the equity market as the week went along which got a boost from news that the imposition of tariffs on Mexican imports is likely to be delayed with encouraging talks between the two sides.
FTSE 350 top movers
The week ahead
Tariff tweets from Trump took a backstage last week while he was kept busy in Europe, however, these could stage a comeback this week! Meanwhile, as Theresa May steps down as leader, the Tory leadership battle goes into full swing with punters backing a Brexiteer as the most likely winner.
In the upcoming week, from the UK we will get the latest monthly GDP numbers. The view here is the economy shrank during April as the build-up activity towards the previous Brexit deadline passed in March. This should be backed up by the latest manufacturing and industrial production data for April, both of which are expected to show more than a 1% month on month decline. We will also have the latest UK jobs figure which is expected to continue to paint a good picture of the UK economy with the jobless rate predicted to hold at 3.8%.
Outside of the UK there will a focus on Chinese industrial output for May and for signs of the trade spat. While in the US the inflation rate during May could have reduced to 1.9% potentially giving more ammunition for the Fed for a rate cut. Investors will also keep an eye on US retail sales, industrial and manufacturing output during the week.
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