Markets update: S&P 500 reaches new highs

Despite it being a relatively light week for new economic data, the S&P 500 made a significant move on Thursday, writes Ian Slattery.

A daily gain of 0.5% pushed that index to a new record high, eclipsing a previous high set five weeks earlier. An index of US consumer prices rose at a 5.0% annual rate in May, the steepest increase since 2008. The latest monthly report highlights that supply continues to have difficulty meeting the robust pace of demand with businesses struggling to source the physical materials and the human resources required to facilitate operations and this is giving way to price pressure across a number of sectors. 

It is expected that the Federal Open Market Committee (FOMC) will keep its benchmark interest rate unchanged as policymakers hold a two-day meeting scheduled to end on 16 June. The recent increase in inflation could ensure concerns of future rate hikes remain top of mind for many US Federal Reserve officials. However, the outsized gains in a few select sectors support the Fed’s view that the current level of price pressures are temporary.

In the UK more evidence of a strong rebound as reports showed April GDP rose 2.3% month-over-month, on top of a large March gain, led by activity in the services sector. The Eurozone economy is also in recovery; the European Central Bank (ECB) held monetary policy steady at last week’s meeting, signalling that it is continuing with its accelerated pace of bond purchases for the time being. 

The ECB kept its Deposit Rate at -0.50% and maintained the size of its Pandemic Emergency Purchase Program (PEPP) at €1.85 trillion, saying that it expects that purchase program to run until at least March 2022.

Equities

Global stocks were up last week, at 1.0% in euro terms and 0.4% in local terms. Year-to-date global markets are up 14.0% in euro terms and 12.8% in local terms. The U.S market, the largest in the world, was up 1.3% in euro terms and 0.6% local terms.

Fixed Income & FX

The US 10-year yield finished at 1.46% last week, down from 1.55% a week earlier. The German equivalent finished at -0.27%. The Irish 10-year bond yield finished at 0.14%, to remain in positive territory. The Euro/US Dollar exchange rate finished at 1.21, whilst Euro/GBP finished at 0.86.

Commodities

Oil finished the week at $71 per barrel and is up 48.5% year-to-date in euro terms. Gold finished the week at $1,861 per troy ounce and is up 0.2% year-to date in euro terms. Copper finished the week at $9,975 per tonne.

The week ahead

Tuesday 15th June

UK employment data is released.

Wednesday 16th June

FOMC policy rate decision announcement.

Friday 18th June

UK Retail sales figures for May are released.