US On Wall Street, the S&P 500 rose 2.22% this week to take it 20% above the bottom it hit in October 2022. This significant milestone indicates that the primary indicator of market performance on Wall Street has successfully recovered from a challenging bear market period, during which it had declined by 25.4% over a span of approximately nine months.
This weeks rally was helped as traders predicted a 73% chance of the U.S. central bank holding interest rates at the current 5%-5.25% range during its monetary policy meeting next week. "Our view remains that the Fed will pause in June, but leave the door open for a July hike, keeping it data dependent. Eventually we don't think the Fed will hike in July," Jefferies strategist Mohit Kumar said. The Nasdaq has risen for seven straight weeks while the S&P 500 is at its highest levels since August 2022.
Inflation data, also due next week, is highly anticipated to show that prices cooled slightly in May. The US Labor Department will release inflation data on Tuesday the first day of the FEDs schedule two-day session.
In the world of economics, the much-anticipated recession of 2023 seems to be losing its momentum, with economists growing increasingly uncertain about its likelihood. This week, Wells Fargo's team of economists joined the chorus of voices revising their recession outlook, pushing the predicted recession to the beginning of 2024. Recent economic data reveals an economy that is proving to be more resilient than anticipated, alleviating concerns of an imminent downturn.
According to Wells Fargo's team of economists, despite the expectations of monetary tightening and reduced credit availability, the economy has displayed a remarkable level of resilience. The delayed impact of these factors is now anticipated to dampen economic growth starting in Q1-2024, rather than the previously predicted timeframe.
Wells Fargo is not alone in adopting a more positive stance on economic expansion in 2023. Goldman Sachs recently revised down the odds of a recession occurring this year from 35% to 25%. This shift in perspective reflects a broader trend among economists, who are reassessing the likelihood of a near-term economic downturn.
Mexico
Inflation in Mexico slowed down for the fourth consecutive month in May to settle at 5.84% for the prevailing 12 month period. According to official data from the Instituto Nacional de Estadística y Geografía (Inegi) released on Thursday inflation continues to cool, helped by drops in energy prices and government tariffs.
On Wednesday the pesos hit is strongest price since May 2016 after briefly touching 17.297 during trading.Among the driving factors, analysts cited the relative weakness of the dollar a week before the Fed's crucial monetary policy decision, the appetite for currencies from emerging economies and the rebound in commodity prices.
According to analysist Mexico could attract up to $50 billion in investment from international companies through nearshoring over the next 6 years but only if it can clear the bureaucracy and red-tape that so often delays projects.
Europe European markets endured a choppy week this week amid cooling UK jobs market and news that the eurozone had officially fallen into a recession. After previously estimating a flat market Eurostat announced that the gross domestic product (GDP) across the eurozone had contracted for the first quarter of 2023 by 0.1%. Europe has been dragged down by the combination of Russia’s war on Ukraine pushing energy and food prices resulting in soaring inflation, falling household consumption, and rising interest rates.
It follows a decrease of the same amount in the fourth quarter of 2022, meaning the eurozone started the year in recession and shrunk for two quarters in a row – the standard definition of a technical recession.
The UK's largest mortgage lender, Halifax, has reported a 1% decline in house prices compared to the previous year. This marks the first such decrease since 2012. In May, typical house prices were £3,000 lower than the same period last year and £7,500 below their peak in August.
Halifax, a part of Lloyds Banking Group, acknowledged that higher borrowing costs were negatively impacting confidence in the housing market. The lender itself is increasing its mortgage rates, while some mortgage rates have already experienced significant increases in recent weeks. This situation arises as lenders anticipate further hikes in the Bank of England's base rate due to a prolonged period of elevated inflation, which has persisted longer than initially expected.
Asia
Asian shares mostly rose Friday closing out a strong week, led by a jump on the Tokyo Stock Exchange where share prices got a boost of optimism from a new bull market on Wall Street. Japan's benchmark Nikkei 225 closed the week 4.36% up to 32,224.68. Hong Kong's Hang Seng advanced 3.43% while the Shanghai Composite rose 0.59%.
Official figures released on Friday revealed that Chinese inflation remained stagnant in May, reflecting the sluggishness of the country's economy due to weakened demand and declining exports. Consequently, there have been increasing calls for a reduction in interest rates and a larger government stimulus package.According to the National Bureau of Statistics (NBS), the consumer price index (CPI) experienced a slight uptick of 0.2 percent compared to the previous year, up from 0.1 percent in April. This result aligns with the expectations of analysts surveyed by Bloomberg.
While Beijing has maintained relatively low interest rates compared to other major economies, the persistently low inflation emphasizes the challenges faced by policymakers in their efforts to stimulate economic growth.
According to CNN, citing data from China's General Administration of Customs, bilateral trade between China and Russia has reached an unprecedented high in 2023. Between January and May, trade between the two countries surged by over 40% compared to the same period last year.
The total value of trade between China and Russia surpassed $93.8 billion, as reported. Notably, Chinese exports to Russia experienced a remarkable increase of 75.6% during this period, in comparison to 2022. This data underscores Beijing's commitment to maintaining a robust partnership with Moscow, undeterred by Western criticism, particularly in light of Russia's invasion of Ukraine.
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