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LLoyd Adams, of TEAM Asset Management, offers this week’s markets review
FINANCIAL markets had a weak showing last week, despite some relief that the Federal Reserve’s preferred inflation measure matched expectations at an annualised rate of 2.8%.
Although still well above the 2% target, it was cool enough to calm investor jitters. Even so, broad economic indicators have been positive, indicating that the path of the first US interest rate cut may still be deferred until September or even into 2025.
In corporate news, Salesforce fell nearly 20% as it provided its lowest-ever quarterly sales growth forecast in its history, fuelling fears that high interest rates and rival artificial intelligence offerings were hampering demand at the cloud-based-software firm. The shares later rebounded and recovered half of the loss.
Elsewhere GlaxoSmithKline investors had a shock with a 10% share price fall. A Delaware court said it would allow a class action, involving 70,000 people who are alleging that the Zantac heartburn drug causes cancer, to proceed to trial. This came only a few weeks after another court dismissed a similar action, so GSK will appeal.
There are many elections this year. In India, it seems certain that Narendra Modi will win a majority for his National Democratic Alliance in the general election. Incredibly, 642 million votes will be counted, making it the world’s largest democratic exercise. The Indian stock market enjoyed a surge of optimism influenced by the Modi positive exit polls.
Hard-pressed car owners may have some relief on high petrol prices. The atmosphere in oil markets is not particularly optimistic this week with a 4% fall. One factor is the recent report from the US Energy Agency on weekly inventories. While stocks of refined products increased significantly.
After his New York conviction, presumptive Republican nominee Donald Trump claimed that his presidential campaign had received a record $34.8 million from small donors in a few hours after the verdict. According to senior campaign advisers, nearly 30% of those donors were new to the Trump donation website.
Hard-pressed UK mortgage borrowers will have to wait until 20 June for the Bank of England’s decision on whether they cut rates 0.25% to 5%.
At the last meeting, the committee voted seven to two against a cut, but market opinion is divided, just as it is in America. There, the jury is still out on whether the Federal Reserve will start the reduction in September, November or even in 2025.
Looking forward to this week, the European Central Bank meet tomorrow, and will decide whether they will deliver the much-expected quarter-point reduction (from 4.5% to 4.25%) in the key refinancing rate. Investors will also be keen to hear any hints about the future path of further cuts and whether uncomfortably high wage rises, stronger economic data and sticky inflation will be a restraint.
Finally, investors should look out for the US employment numbers on Friday, which is always a market-moving event. The forecast is for 180,000 new jobs and any higher number is likely to keep markets subdued.
