Global capital markets trended downwards this week, with a sharp dip on Wednesday following the release of the latest U.S. economic data and persistent inflation problems. The NASDAQ and S&P index surged earlier in the week after the news of a stock split by Nvidia. Minneapolis Fed president Neel Kashkari’s statement about a return to a hawkish stance by the Fed brought that rally to an end and the talk of a possible recession towards the end of 2024 added to investor worries. Internationally, Eurozone’s inflation made the talk of rate cuts a distant possibility. The Chinese economy continued to stutter with a contraction in manufacturing activity and a worrying unsold stock pile of 60 million apartments in the country. Finally, in geopolitics, Ukraine was permitted to use American weapons for limited strikes inside Russia, while Israeli offensive on Rafah has opened the U.S. and Egypt to domestic political pressures.

Global Updates
  • The MSCI All Country World Index trended downwards this week and fell sharply on Wednesday after Minneapolis Fed president Neel Kashkari confirmed a hawkish monetary policy, with the possibility of a Fed rate hike if inflation remains stubbornly high.
  • Eurozone inflation in May came in at 2.6% year-on-year, a bigger-than-expected increase in inflation. Consequently, the ECB is unlikely to lower borrowing costs from a record high next week. 
  • Taiwan’s economic growth of 6.6% in the first quarter spurred by global demand for new tech has improved the island’s tech exports.
  • China’s commerce ministry customs agency and the central military commission have jointly announced control measures on exports of aviation equipment, technology and software for security reasons. This comes as a surprise after the country’s latest PMI data signaled a contraction in factory activity with falling new orders and foreign sales.
  • Global equity funds witnessed outflows to the tune of $4.9 billion for the first time in five weeks, hit by rising U.S. Treasury yields and investor caution ahead of a crucial U.S. inflation report.
  • Saudi Arabia’s government filed papers to sell a new stake in state oil giant Aramco that could raise as much as $13.1 billion, a landmark deal to help fund Crown Prince Mohammed bin Salman’s plan to diversify the economy. 
  • Republican nominee Donald Trump has been found guilty on all 34 charges against him and faces incarceration. But the conviction may not have any consequences on the election, as the appeals process is expected to take a long time.
U.S. Equity
  • The NASDAQ index crossed the 1700 mark this week pushed up by the demand for NVIDIA stock. All three indexes dipped early in the week with investors speculating on delayed rate cuts. The NASDAQ and S&P 500 rose later in the week, while the Dow Jones index continued to dip 
  • NVIDIA’s stock continued to soar and even crossed $1,150 mark briefly, after the company announced a 10-to-1 stock split scheduled for June 7th, 2024.
  • Brent crude futures corrected upwards this week from its fall the week before, even as USA crude and gasoline inventories declined by 6.5 million and 450 thousand barrels respectively.
  • Elon Musk addressed xAI investors on the plans to build a supercomputer. His estimated requirement of 100,000 semiconductors and a possible partnership with Oracle. 
  • American Airlines has dropped its guidance for the current quarter due to decreasing travel spending in the economy.
  • Software giant Salesforce’s stocks fell 20% after underperforming in the first quarter. Discount retailers Ross and TJX raised guidance for the year. Bulk retailer Costco shares touched a high of $817 this week with first quarter revenues beating investor expectations.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index declined marginally this week. 
  • The U.S. 10-year Treasury yield marginally rose to 4.56% over the week and the yield on the 2-year note rose to 4.95%.
  • The U.S. Dollar Index marginally rose to 104.88 during the week.
  • The part of the U.S. Treasury yield curve that plots two-year and 10-year yields has been continuously inverted since early July 2022. This streak has officially exceeded the record of 624 days inversion in 1978.
Sources

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