Renewed coronavirus worries and escalating rhetoric from the United States about tariffs on European goods dampened the stock market mood somewhat this past week. Meanwhile purchasing managers’ indices and other indicators showed improvements. The MSCI All Country World Index, measured in US dollars, fell by 1.5%.
Stock market movements were small this past week, with hopes of more stimulus measures and reopening after lockdowns slightly offsetting worries about new COVID-19 outbreaks and geopolitical tensions in parts of Asia. Globally, we saw an upturn of around 1% in share prices. Macroeconomic data published during the week provide support for rising investor confidence. Purchasing managers’ indices in the euro area are approaching pre-pandemic levels. In the United States, retail sales rose nearly twice as fast month-on-month as market observers had predicted: by 17.7% in May.
Market Outlook: Fed corporate bond-buying plans may offset virus-related worries
Stock markets fell last week, due to investor worries about a second wave of coronavirus outbreaks, a US Federal Reserve policy meeting that caused disappointment and downward revisions in economic forecasts. We view this as a correction during an upward trend rather than as the beginning of a lengthy decline.
Market Outlook:Macro uptick fuels stock market rally
We have seen a continued stock market rally this past week, driven by powerful stimulus measures and better than expected macroeconomic data, especially in the American labour market. The S&P 500, a broad US equity index, took a breather yesterday, but is back at around its year-end 2019 levels and is only about 5% below its February peak. The more tech-heavy Nasdaq index is at all-time highs and it looks as if the positive market trend may persist.
Market Outlook: Stock markets are still resilient
Stock markets are still being propped up by hopes about restarting economies and stimulus measures. This past week we have also seen a tragic series of events in the United States − after the Minneapolis police caused the death of an African-American man in their custody, George Floyd − but subsequent widespread demonstrations and vandalism have not significantly affected financial markets. Over the past month until June 2, Swedish and American stock markets gained 8-11% in local currencies, though they remained 5-6% below year-end 2019 levels.
Market Outlook: Stock market strength, despite increased trade and security policy concerns
The strength of the stock market is impressive. In the United States, the broad S&P 500 equity index gained 3.2% last week. This was a 32% upturn from its March 23 low. Risk appetite is fuelled by hopes of a COVID-19 vaccine, continued signals of virus stabilisation, restarted economies and data showing that growth bottomed out in April. The Swedish krona is also benefiting from this environment. Medical advances will be important to risk appetite as well as business and household confidence, in a world that is likely to face virus-related setbacks. Heightened security and trade policy concerns have not been enough to lower market willingness to take risks.