European inflation climbs ahead of key ECB policy meeting

Eurozone inflation saw upwards momentum during May, the data coming ahead of this week’s crucial European Central Bank (ECB) monetary policy meeting. The 2.6% confirmed figure represented a rise of 20 basis points (bps) on the prior month, exceeding expectations of a 10bps increase due to an acceleration in services inflation[1]. Whilst the data is unlikely to deter the ECB from cutting rates for the first time in this cycle on Thursday, it does cast some doubts over what the pace of future easing could look like. European government bond yields moved higher on the news with German yields reaching their highest level for six months. The MSCI Europe ex UK equity index ended the week -0.4% lower in local currency terms.

It was a negative week in general for global equity markets with most major benchmarks concluding Friday in negative territory. The S&P 500 and NASDAQ retreated by -0.5% and -1.1% respectively (US dollars) with growth stocks facing the heavier selling pressure. Back in Europe, the FTSE 100 fell by -0.5% on little news whilst in Asia, the Nikkei 225 shed -0.5% (in yen). An acceleration in inflation in the Tokyo area added to growing speculation that the Bank of Japan (BoJ) could raise interest rates again shortly. As for China, the Shanghai Composite was flat as investors digested a deterioration in the nation’s manufacturing purchasing manager index (PMI) which slipped back into contractionary territory last month[2].

Moving to commodities, oil prices were little changed ahead of Sunday’s OPEC+ meeting. Brent Crude closed Friday at $81.80 a barrel, +0.1% higher for the week with OPEC+ ultimately electing to extend its production cuts into 2025 at yesterday’s gathering. Copper prices retreated from its recent record high, the metal shedding -2.9% to $9,913 a tonne although it remains some +18.0% higher over the past three months. Gold also lost ground, the precious metal declining by -0.4% to a still elevated $2,331 an ounce.

Week Ahead

Day	Country	Measure	Period	Forecast	Previous
Monday	China	Caixin Manufacturing PMI	May	51.50	51.40
	US	ISM Manufacturing PMI	May	49.80	49.20
Tuesday	N/A	-	-	-	-
Wednesday	China	Caixin Services PMI	May	-	52.50%
	Europe	Final Composite PMI	May	52.30	52.30%
	UK	Final Composite PMI	May	52.80	52.80%
	US	ADP National Employment Change	May	173K	192K
Thursday	Europe	European Central Bank Monetary Policy Meeting	June	-	-
Friday	China	Exports YoY	May	-	1.50%
	China	Imports YoY	May	-	8.40%
	Europe	GDP QoQ Revision	Q1'24	0.30%	0.30%
	US	Average Wages YoY	May	3.90%	3.90%
	US	Non-Farm Payrolls	May	180K	175K
	US	Unemployment Rate	May	3.90%	3.90%

Source: Refinitiv Workspace, 03/06/24

[1] Eurostat – CPI Inflation May 2024

[2] China Federation of Logistics & Purchasing – Manufacturing PMI May 2024

Past performance is not indicative of future performance.

The value of an investment may fall as well as rise. You may get back less than the amount invested.

The value of investments may fall as well as rise purely on account of exchange rate fluctuations.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2024. FTSE Russell is a trading name of certain of the LSE Group companies. “FTSE Russell®” is a trade mark of the relevant LSE Group companies and is used by any other LSE Group company under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company's express written consent. The LSE Group
does not promote, sponsor or endorse the content of this communication.

Source: MSCI. MSCI makes no express or implied warranties or representations and shall have no liability whatsoever with respect to any MSCI data contained herein. The MSCI data may not be further redistributed or used as a basis for other indices or any securities or financial products. This report is not approved, endorsed, reviewed or produced by MSCI. None of the MSCI data is intended to constitute investment advice or a recommendation to make (or refrain from making) any kind of investment decision and may not be relied on as such.

The information contained does not constitute investment advice. It is not intended to state, indicate or imply that current or past results are indicative of future results or expectations.

Full advice should be taken to evaluate the risks, consequences and suitability of any prospective investment. Opinions provided are subject to change in the future as they may be influenced by changes in regulation or market conditions. Where the opinions of third parties are offered, these may not necessarily reflect those of Rowan Dartington.

Rowan Dartington is part of the St. James’s Place Wealth Management Group. Rowan Dartington & Co. Limited is a member firm of the London Stock Exchange and is authorised and regulated by the Financial Conduct Authority. Registered in England & Wales No. 02752304 at St. James’s Place House, 1 Tetbury Road, Cirencester, England, GL7 1FP, United Kingdom.

SJP Approved 03/06/2024