There was a notable divergence in equity market returns last week with US indices reaching new records whilst their European counterparts lost ground. Strong advances were seen across the technology sector with optimism around artificial intelligence (AI) remaining a significant tailwind. The NASDAQ jumped by +3.2% with the broader S&P 500 adding +1.6% (both figures in dollar terms). Further support came from Wednesday’s CPI inflation print which came in lower than expectations at 3.3% (forecast: 3.4%)4. Whilst still higher than the Federal Reserve’s 2.0% target, the decline was certainly a step in the right direction although the Bank refrained from cutting rates at last week’s policy meeting. Treasury yields retreated across the week with the 10-year security falling by more than 20 basis points (bps) to 4.21% by Friday’s conclusion.

Heavy losses were seen across European indices as investors dealt with the fallout from the European Parliament elections. Strong gains by far-right parties across the Continent prompted a sharp decline in equity markets with the MSCI Europe ex UK index retreating by -2.8% in local currency. Elevated uncertainty also prompted a surge in sovereign yields with the announcement of a snap election in France compounding the issue. Across the Channel, the FTSE 100 and FTSE 250 declined by -1.2% and 2.1% respectively with weak economic growth data a headwind. Moving to Asia, the Shanghai Composite in China shed -0.4% with deflationary pressures continuing to persist across the economy. As for Japan, the Nikkei 225 added +0.4% with last week’s Bank of Japan policy meeting perceived as dovish by the market.

In the commodities space, oil prices rallied despite lingering concerns around the demand outlook. Brent crude rose by +3.6% to $82.58 a barrel, its strongest weekly showing for two months. Moving to metals, copper prices retreated modestly, concluding the week -0.2% lower at $9,615 a tonne. The metal has steadily pulled back from the record high set back in May when supply concerns and increased Chinese demand optimism helped to propel the price skywards. As for gold, the precious metal rose by +0.7% to $2,332 an ounce.

Week Ahead

Source: Refinitiv Workspace, 17/06/24

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