Weekly Market Review - June 3-7
The markets are still closely watching the evolution of the trade war between the US and China, with the former being ready to impose a 5% tariff on Mexican goods. The situation is putting pressure on the US economy, which might lead to rate cuts from the Fed. In light of this, the US dollar has been the worst performing major currency, losing 0.84% against the euro and 0.65% against the British pound.
Precious metals have benefited from the market tensions, with gold and silver adding 2.41% and 2.12%, respectively.
In the cryptocurrency market, Bitcoin is currently trading at around $7.990, losing about 4% for the week.
Manufacturing Activity in Eurozone Declines
Eurozone’s manufacturing activity slowed for the fourth month in a row in May. What’s worse, the contraction came at a faster pace amid the trade war between the US and China and Brexit. The manufacturing purchasing managers’ index, prepared by IHS Markit, fell last month to 47.7 from April’s 47.9, in line with the preliminary reading and just above the six-year low recorded in March.
Factory Activity Also Under Pressure in Asia
Eurozone is not the only region noting a decline in factory activity. In April, the index showed a negative reading across all Europe and Asia, with a few exceptions. The re-escalating US-China trade tensions are prompting investors’ fears that a global economic downturn is just around the corner. US President Donald Trump might meet with Chinese President Xi Jinping at the 2019 G20 Osaka summit this month, and if the tensions still persist, central banks might be forced to cut interest rates, which, according to some economists, might eventually lead to a world recession.
South Korea’s GDP Loses 0.4% on The Quarter
South Korea’s economy fell 0.4% in the first quarter of this year, according to the Bank of Korea. The data was revised downward compared to the 0.3% decline calculated earlier. The central bank noted that the performance of exports and construction investment was worse than expected compared to previous estimations in late April. Year-on-year, South Korea’s gross domestic product (GDP) rose 1.7% in the first quarter, below the previous evaluation at 1.8%.
Eurozone’s Inflation Below ECB’s Target
Inflation in the eurozone contracted more than expected in May, which puts more pressure on the European Central Bank, whose policymakers might be forced to add more stimulus measures. The consumer price index in the 19 countries using euro declined to 1.2% in May from April’s 1.7%, below analysts’ expectations at 1.3%. Core inflation, which excludes food and energy prices, declined to 1.0% from April’s 1.4%. ECB’s inflation target is just below 2.0%.
Australian GDP Shows Weakest Result Since 2009
Australia’s economy slowed to the lowest level in the last ten years, which might push the central bank to seriously consider an active monetary stimulus. The GDP growth in the three months through March was 0.4%, below economists’ expectations for a 0.5% expansion, even though the figure is above the growth in the fourth quarter of 2018, at 0.2%. Year-on-year, the GDP expansion was 1.8%, way below the short-term average at 3.5% and the slowest since the financial crisis.
US Jobless Claims Stay Unchanged
The number of US citizens applying for unemployment benefits for the first time was unchanged last week, proving that the labour market keeps steady amid slowing economic activity. The Labor Department announced on Thursday that initial jobless claims remained unchanged at a seasonally adjusted 218,000 last week. The previous week’s figure was revised upwards from 215,000. The four-week moving average declined last week by 2,500 to 215,000.
Upcoming News to Watch
Next week, several major economies will release inflation data. Thus, China and the US will report on their consumer price index (CPI) on Wednesday, while Germany and France will release similar reports on Thursday and Friday, respectively. Italy, Norway, Finland, Sweden, and Ireland will also publish inflation data throughout the week.
In the first hour on Monday (UK time), Japan will report on its economic performance for the first quarter of this year. The UK will also release GDP data in annual and monthly terms a few hours later.
The week will end with a few reports from the US, including data on retails sales, manufacturing production, and industrial production.
Anatol has been writing for our news site for a year and is the newest member of our team. While he’s new to us, he’s certainly not new to trading with over 10 years’ experience being a professional financial journalist and working in the markets. Learn more.