UK equity markets continued their downward trend this week as the US Debt Ceiling decision, further interest rate decisions from central banks, and a continuing hangover from the collapse of some US regional banks all weighed on investors’ minds. At the time of writing, the internationally weighted FTSE 100 was down -0.5% on the week, the UK centric FTSE 250 is up 0.8% on the week.
UK housing prices data released on Thursday showed the property sector is beginning to cool relatively in-line with expectations, as prices dropped -3.4% YOY. Despite this report some UK housebuilders have seen some improvement since this news release.
US Equity Markets
US investors were concerned that a potentially catastrophic scenario would unfold, which would see the US default on its debts if an agreement could not be made by 5th June deadline. A deal brokered by Democratic President Joe Biden and Republican leader of the House of Representatives Kevin McCarthy was passed through the House of Representatives 314 to 117 on Thursday, which the President heralded as “Great for the American economy and the American people”. To secure an agreement however, Democrats were forced to make concessions to The Republicans, including spending cuts. The bill now heads to the Senators who could implement some amendments but are likely to pass.
Whilst the debt ceiling announcement weighed on investors’ minds, all major US indices were up on the week, with the NASDAQ 100 leading the way (+3.22%), the S&P 500 (+1.46%) and the Dow Jones Industrial (+0.71%). Driving this upward movement was the positive performance in semi-conductor stocks which have performed well following very strong results released last week. Increased demand for semiconductors, specifically those designed to handle the ever-increasing demands from Artificial Intelligence (AI) led to better than expected earnings from some key stocks.
US futures extended gains this afternoon, with contracts on the Dow Jones rising nearly 200 points, the S&P 500 and the Nasdaq gaining more than 0.5% after the non-farm payroll US jobs report contributed to the positive market sentiment. The US jobs report for May exceeded expectations with the addition of 339K jobs, surpassing the forecast of 190K but the unemployment rate rose to 3.7%, higher than the expected 3.5% and reaching a 7-month high while wage growth was in line with forecasts.
Commodity Markets
Gold has performed well in the latter stages of this week, in-line with most major equity indices, and is up 2% to $1,980.6 per ounce.
Brent Crude has undergone a turbulent trading session this week and has fluctuated between $70-$77, however, now sits at $75. Investors continue to keep a firm eye on OPEC’s next move as cuts to production (a decision made in April) have not had the desired effect to raise prices. The Group meets this weekend and Saudi Energy Minister, Prince Abdulaziz bin Salman has indicated there will be further cuts to production, stating that those with short positions in the market should ‘watch out’.
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