In this week’s market insights, our investment team shares positive market news about the global equities market posting a gain last week and how the US labour market is reflecting strong growth despite inflation.
(4 July 2022 – 8 July 2022)
Global equities posted a weekly gain last week with the MSCI World Index up 1.71%, US equities enjoyed a week of outperformance with S&P 500 up 1.96%. MoneyOwl’s 100% equity portfolio was in turn up 0.97%. Equities erased much of the previous week’s losses on optimism that the Federal Reserve will be able to curb inflation without tipping the economy into a recession. Equities also held on to Friday’s job report from the US, which painted a picture of consistency and strength in the labour market at a time when recession dominates investment conversations.
Global Fixed Income came in negative last week after rising for three weeks in a row as the Bloomberg Barclays Global Aggregate bond index fell 1.00%. The US 10-year government bond yield rose to 3.10% on Friday amid continuing concerns about persistent inflation and tightening monetary policy.
US Jobs Resilience
Despite high inflation, the US labour market continued to post strong growth in June. The economy generated 372,000 new jobs – exceeding most economists’ forecasts – while the unemployment rate held steady at 3.6% for the fourth month in a row. Average hourly earnings rose 5.1%.
Shinzo Abe assassinated
Former Japanese Prime Minister Shinzo Abe died after he was shot during a campaign event on Friday. The 67-year-old and Japan’s longest-serving premier, was shot from about 3 metres (10 feet) away with what appeared to be a homemade firearm in the city of Nara as he was giving a campaign speech for the ruling Liberal Democratic Party. The man who attacked Abe has been arrested. The attack shocked a nation where political violence and guns are rare.
BoJo’s Mojo
Boris Johnson announced his intention to resign as UK prime minister, bowing to the inevitable after the mass resignation of members of his government and excoriating public attacks on his judgment, leadership and allegiance to the truth. Johnson will remain as caretaker Prime Minister until October when a new Tory leader will be in place. But the ruling Conservative Party is urgently drawing up plans for an accelerated contest to choose his successor by the end of the summer, rather than allowing the extended three-month period.
China Stimulus
China is preparing for a fresh round of economic stimulus with the Ministry of Finance considering allowing local governments to bring forward about $220 billion worth of special bond sales into the second half of this year. The debt would mostly be used to pay for infrastructure spending, an old playbook that policymakers are using to boost an economy hit by Covid lockdowns and a housing slump. In China, there was little good news on that front, with Shanghai reporting the most virus cases since May, fuelling concerns of a fresh lockdown in the financial hub.
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