Market SummaryAsia
Asian markets ended mostly higher last week, which was a vast improvement from the previous week. Japan’s Nikkei led the way, adding 2.3% for the week as it gained in four of five sessions. Mainland China’s Shanghai Composite under-performed, falling for the third consecutive week, although losses were more modest this week as the index lost just 0.3%. Hong Kong’s Hang Seng gained in six consecutive sessions, and was poised for a nearly 3.5% weekly gain until it dropped sharply on Friday, finishing the week 1.6% higher. Australia’s S&P/ASX 200 gained 0.9% and the Kospi was 0.5% higher.
The coming week could start off with investor reaction to the G7 meetings, where six of the members are expected to put pressure on the seventh member – the U.S. – to moderate its tone in regards to trade and tariffs. A positive result will almost certainly give markets a list at the start of the week, while a negative result could see losses across the region. The tail-end of the week could also get quite hectic as markets will first digest the latest Federal Reserve monetary policy on Thursday, with expectations high for a rate hike. Friday will begin with reactions to the overnight meeting of the ECB, when investors will likely learn about the schedule for tapering bond purchases in the EU; and later in the day the Bank of Japan will report their latest monetary policy decision.
Europe
European markets seesawed back and forth, finishing the week mixed as worries over the political situation in Italy first eased after a coalition government was formed, and later brought more pressure to equities as the new coalition government began putting forth plans. The pan-European Stoxx Europe 600 ended with a weekly loss of 0.5%, mostly due to the Italian political drama. The CAC 40 in France also retreated 0.3% for the week. Germany’s DAX fared better, posting a 0.3% gain even as it fell in the final two sessions of the week. In London, the FTSE finished the week 0.3% lower as well.
Italian politics could continue to feature in the upcoming week, as the new Italian industrial minister said Friday he plans to ask for more funds from the EU. Italian politics notwithstanding, investors in the region will have plenty of other developments to digest. The news from the G7 over the weekend is almost sure to move markets on Monday; and later in the week investors will be faced with a likely interest rate hike in the U.S. and a schedule for unwinding bond purchases from the ECB.
US
U.S. markets had the best week compared with global markets, with all three of the major benchmark indices posting solid gains. The Dow Industrials put in the best performance, rising 2.8% for the week as blue chip names took the lead. It was the best weekly performance for the Dow since March, with the index rising for three consecutive sessions to end the week. The S&P 500 had a gain of 1.6% as it struggled on Thursday. The Nasdaq added 1.2% on a weekly basis as technology names came under pressure late in the week.
The coming week could open with caution as investors will almost certainly be looking ahead to the Federal Reserve monetary policy meeting, which ends Wednesday and is expected to produce an interest rate hike. This could mean flat to lower equities leading up to the monetary policy decision. There will also be eyes on the ECB to a lesser extent, as the end of quantitative easing in the European Union will have definite ramifications for U.S. businesses and for the U.S. dollar.
Gold/Crude Oil
Gold remained under pressure early in the week as traders continued to follow Italian political drama and the trade war potential from recent U.S. tariffs. Somehow gold managed to gain nearly 0.3% for the week, however, mostly on a strong session that took the yellow metal back above the $1,300 level early in the week. With U.S. interest rates ready to rise and the ECB probably announcing an unwinding schedule for its bond purchases in the coming week, gold is going to struggle to continue receiving support from that $1,300 level.
Crude bounced back and forth throughout the previous week, and remains quite volatile, with daily moves exceeding 1% on most days, and yet it finished the week nearly flat with a small 0.1% loss. Traders continue to weigh potential supply shortfalls from Venezuela and Iran, with the outcome of a meeting of major oil producers later this month and shifting sentiment causing extreme market moves. The coming week sees no change for either of these factors, with the potential for supply shortfalls still there, and the meeting of major oil producers not scheduled until June 22. This indicates volatility will continue for markets.