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Astute Market Overview - 6th June 2023



Welcome to the Astute Market Overview of the last week.

It was a shortened trading week for some key markets – we enjoyed a sunny Spring Bank Holiday here in the UK, and in the US, where we will start this week’s overview, it was Memorial Day.

One could have easily missed one of the biggest pieces of news over the week: the US debt ceiling crisis has been averted!

Yes, economists, central banks and investors across the world can relax, and put away their support rods. Following mounting concerns that the US government could default on its debt repayments, the senate passed legislation, and the US debt ceiling has been suspended until January 2025.

Given that a deal to avoid default needs cross party support, Joe Biden commended the bipartisan endeavours, commenting “both sides operated in good faith”.

Elsewhere last week, we had the release of eurozone CPI. The measure for May 2023 was 6.1%, which is lower than many economists had forecast.

Over last year, inflation in the euro area didn’t quite soar as high as inflation in the UK, peaking at 10.6% in October vs. 11.1% in the UK in October, and the CPI measure has fallen by more.

Whilst the deceleration of inflation is welcome news, there is still work to do, given that 6.1% is still much higher than the European Central Bank’s 2% target.

We also had Euro Area Consumer Confidence for May (a key economic indicator of consumers’ expectations based on their position and thoughts about the economy), which edged up to -17.4 from -17.5, the highest reading in a year.

And finally, bringing it back to the US, equity markets in the region ended the week with a flourish, alongside the release of US jobs data.

Payrolls were high – 339,000 to be precise. This is the number of jobs added to the private and government sector in the US. Despite this, the unemployment rate rose to 3.7% from 3.4%; an increase in the unemployment rate often reflects a slowdown in economic activity, which should help to ease inflationary pressures. The discrepancy occurs due to how the two surveys are conducted, given than one surveys employers, and one surveys households.

This release is always watched closely by the Federal Reserve, and is one of the last key pieces of data before the next interest rate decision in the US. If managing the economy were as simple as balancing a scale, then these two releases would add weight to each side. This offers little clarity as to whether the Fed will be happy with the current interest rate following over a year of interest rate increases, or they’ll want to add an ounce more into the mix.

Coming up this week, we have Japan and Eurozone Q1 GDP, and China CPI. See you next time.

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