Market Overview|Quilter Cheviot

Markets take stock after recent gains

Market Overview from Quilter Cheviot

by Alan McIntosh, Chief Investment Strategist

There were modest declines in global equities last week with stocks paring some of the prior week’s sizable gains. Truncated by a US bank holiday on Monday, for Memorial Day, and a double UK bank holiday, for the Queen’s Platinum Jubilee, the week’s trade saw volatility moderate further as investors continue to weigh up the latest dynamics on inflation and economic activity.

The US dominated the week’s economic data with a series of releases that offered little to suggest an impending recession. Another solid update on the labour market was the standout data point, showing employers added 390k nonfarm jobs in May, comfortably above the consensus forecast of 320k. What is more, the unemployment rate held steady at 3.6% while average earnings growth ticked down to 5.2% annualised after 5.5% in April, suggesting broader cyclical price pressures could be close to peaking.

The strong payrolls contributed to a notable increase in US Treasury yields, as the 10-year rose 20 basis points on the week to end at 2.94%. Quantitative Tightening in the US has now begun, adding a new dynamic to the bond market. The Federal Reserve plans to absorb cash, selling bonds or letting them mature, to the tune of US$47.5bn a month, in time increasing up to US$95bn a month, as it seeks to reduce its US$9tn of assets held on its balance sheet…

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