Weekly house view

Weekly house view | UK elections on 4 July

The CIO's view of the week ahead.

The week in review

It was a rocky week for US equities, with the cheer generated by blockbuster earnings from the world’s main AI-related chipmaker quickly eclipsed by renewed doubts about prospects for Fed rate cuts. This was because business activity and employment data continued to point to a strong US economy. In the end, tech stocks helped the S&P 500i to a paltry 0.05% gain for the week (in USD), but US small caps were hurt by the rise in bonds yields, fuelled by the release of Fed minutes showing US central bankers remain uncertain about inflation prospects. European small caps did comparatively better. Profit taking was in the air in Asia after hefty rises in Chinese and Hong Kong indexes since mid- April. Among the biggest jumps in bond yields were to be seen in the UK (the result of the surprise calling of a general election) while Japanese 10-year yield again touched an 11-year high of 1% on growing expectations of policy tightening. Yet the yen continued to lose ground against the USD. More subdued Chinese buying meant that gold retreated, while commodities (oil, copper) also declined.


Risks are far from over, with China holding military drills around Taiwan and halting delivery of Boeing aircraft, and Hamas firing rockets at Tel Aviv.

Key data

S&P Global’s composite purchasing manager index (PMI) for the euro area rose to a 12-month high of 52.3 in May from 51.7 in April, although services activity remains much stronger than manufacturing. In the UK, the composite PMI dropped back to 52.8 from 54.1. S&P Global’s composite PMI for the US rose sharply to reach a 25-month high of 54.4 in May, up from 51.3 in April. As in Europe, the services sector drove most of this improvement. Separately, the University of Michigan’s consumer sentiment survey dropped to 69.1 in May from 77.2 in April. One-year median inflation expectations rose to 3.3% from 3.2%. In the UK, the headline consumer price index (CPI) dropped (less than forecast) to an annual 2.3% in April from 3.2% in March. In Japan, core CPI number came in at an annual 2.2%, down from 2.6% in March.

[i] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, S&P 500 Composite (net 12-month return in USD): 2019, 31.5%; 2020, 18.4%; 2021, 28.7%; 2022, -18.1%; 2023, 26.3%.
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