Global stocks expected to experience 4th month of gains in data-packed week
Global stocks were firmly on track to post a fourth straight month of gains on Monday, while the dollar struggled widely amid a series of European and US data this week that will provide a clearer picture of the recovery path of the global economy.
The largest MSCI global equity index (.MIWD00000PUS) drifted 0.1% higher, putting the gauge on track for a 1.4% gain for May. This is the index’s longest monthly streak since August 2020, when it marked a series of five-month gains, according to data from Refinitiv.
But the market for US equity futures and European spot stocks was calm on Monday due to the holidays in the US and Britain, with benchmarks remaining in well-worn ranges.
May has turned out to be a decent month for asset markets, but policymakers are increasingly faced with the dilemma that inflation is on the march while the underlying structural economy is still struggling. gain ground.
The main event of the week will be US payrolls on Friday with a median forecast of 650,000, but the outcome is uncertain after the unexpected gain of 266,000 recorded in April.
Although the US inflation data last week was above the estimate, another big setback on the jobs front would put pressure on the Fed to postpone plans to cut its stimulus measures. Read more
“So the question is whether by September the Federal Reserve will be able to announce a cut in its bond purchases from next year, and the chances are pretty good even if they could be postponed to December, “said Sébastien Galy, a strategist at Societe Generale.
The Fed will next meet on June 16, and this week will be the last opportunity for members to discuss policy before a pre-meeting blackout begins on June 5.
So far, investors have taken the Fed at its word that the job market needs to improve further before talking about tapering. This helped the yields on the 10-year U.S. notes fall back to 1.58% with the pricing of federal funds futures during a first rate hike by the first quarter of 2023.
Asian stocks edged up and European indices consolidated their gains after last week’s record close ahead of Tuesday’s manufacturing PMI data.
Among central banks debating inflation trends, the European Central Bank may be the outlier with policymakers and investors on the same page when it comes to expecting a return to below target inflation, according to Ulrich Leuchtmann, head of currency and commodities research at Commerzbank. .
This was also evident in the bond markets, where yields on German benchmark debt have remained well below recent highs.
An accommodating Fed also put the greenback under pressure against its rivals, with the dollar recouping some of its losses after hitting a three-year low against the Chinese yuan.
The yuan has been the main driver in global currency markets after policymakers ordered financial institutions to hold more currencies in reserves, a move that analysts said was intended to dampen the strength of the yuan.
In offshore markets, the yuan currency weakened 0.23% against the US dollar, with ING analysts saying Beijing’s latest move will slow the currency’s rise but not stop it completely.
Worries about global inflation and slowing growth have turned out to be a boon for gold, with gold prices rising 8% this month, rising comfortably above $ 1,900.
Oil prices have been firm after rising more than 5% last week to two-year closing highs as expectations of a rebound in global demand outweighed concerns over increased supply from Iran a once the sanctions have been lifted.
All eyes will be on OPEC this week as it reconsiders its supply deal, and any hints of increased production could put pressure on prices.
Brent added 38 cents to $ 69.10 a barrel, while US crude rose 39 cents to $ 66.71.
Unusually silent cryptocurrencies showed signs of volatility in holiday trading, with bitcoin rising 4% to $ 37,000 while smaller rival Ethereum climbed 8% to $ 2,578.
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