06/03/2024

Although the week closed on a more constructive note, thanks to the release of US inflation data which confirmed a gradual slowdown in prices, global stock markets experienced their second consecutive week of decline. Nevertheless, this did not prevent May from being the most bullish month of 2024.

It could have been much worse: until Thursday's session, the trend in world stock markets had been worrisome. In the early part of the week, the disappointing investor demand in several US Treasury debt auctions, along with stronger-than-expected consumer confidence and some statements from Federal Reserve members that did not entirely rule out further rate increases, caused a sharp rise in sovereign bond yields on both sides of the Atlantic. This caused a significant deterioration in the risk appetite on the global stock markets.

Subsequently, however, things began to stabilize, and global equity indices ended the week with moderate declines, around 0.5%. In Europe, stock market declines were more pronounced. However, since the European close last Friday, the American index has recovered nearly 1.4%, which will undoubtedly have a positive impact on today's European market opening.

The Japanese market recorded slight declines over the week, while emerging markets faced a very challenging week, resulting in significant setbacks across all geographic areas. In particular, both the Asian and Latin American stock markets recorded declines of around 3%.

In fixed-income markets, bond yields rebounded again, resulting in a moderately negative week for sovereign bond prices. Meanwhile, oil, gold, and industrial metal prices declined slightly, while the main currencies showed stability in the weekly calculation.

Regarding the published macroeconomic data, prices took center stage and brought us various unexpected outcomes: on the one hand, May's inflation in Europe surprised on the upside. Specifically, the CPI for the entire eurozone rose from 2.4% to 2.6% year-on-year in the overall rate and from 2.7% to 2.9% in the core rate, one-tenth and two-tenths above the forecast, respectively. However, the private consumption deflator met market expectations in the United States and remained at 2.7% year-on-year, a relief after three consecutive months of inflation figures surprising on the upside.

In China, the leading indicators for May came out below expectations, highlighting the structural issues facing the economy of the Asian giant, which will likely struggle to gain momentum in the short term.

The upcoming week is packed with notable events, with a particular focus on US employment figures and the European Central Bank meeting. In the former case, the expectation is for the creation of 190,000 new jobs in the United States, with the unemployment rate remaining steady at 3.9% and hourly wages experiencing a slight acceleration. Any data point significantly above market expectations could lead to weakness in the financial markets, as it would push back the Fed's rate cuts.

On the other hand, the European Central Bank will kick off its monetary easing process with the first 25-basis-point interest rate cut. We expect both the Bank of England and the Federal Reserve to join the movement in the coming months.

In the meantime, political uncertainty will remain high, and we will have to pay attention to the multiple electoral processes in the coming days. However, in general, election results are expected to be well received by the markets.