The Long and Short of it, week ending 02 June 2023

Publication Type: Market Commentaries
The Long and Short of it, week ending 02 June 2023

The 3 major stock market indexes recorded gains for the week, rising higher on increased expectations of a Fed pause, the resolution of the debt ceiling impasse and the strong performance of tech stocks. Comments from Fed officials espousing a wait-and-see approach regarding future rate hikes limited losses Wednesday (following a stronger-than-expected JOLTS report) and then helped move markets higher the remainder of the week despite continued historically low initial jobless claims and a strong (in certain regards) jobs report. The passage of the debt ceiling bill by both houses of congress also strongly contributed to last week’s gains. 10-year Treasury yields fell last week, reacting not only to increased expectations of a Fed pause but also to seemingly waning wage pressures (as shown in Friday’s jobs report). The U.S dollar, however, finished the week only slight weaker, strengthening ½ percent Friday following the jobs report. For the week, the S&P 500 Index increased 1.8% to 4,282.37, the Nasdaq Composite Index gained 2.0% reaching 13,240.77, the Dow Jones Industrial Average rose 2.0% to 33,762.76, the 10-year U.S. Treasury rate fell 11bps to 3.70% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.2%.

Despite a somewhat volatile week for European stock indexes, both the STOXX 600 and FTSE 100 Indexes ended the week almost unchanged. Both indexes moved lower early in the week, falling on U.S. debt ceiling concerns, weak Chinese manufacturing activity and concerns of stubbornly high inflation in Europe as well as in the U.S. Markets, however, reversed losses Thursday and Friday reacting to lower-than-expected euro zone inflation (lessening ECB rate hike concerns), the resolution of the U.S. debt ceiling impasse, a stronger-than-expected Caixin/S&P Global PMI release and dovish comments from Fed officials. 10-year Gilt and Bund rates decreased markedly reflecting growing expectations of less aggressive BoE and ECB monetary policies going forward. (Interestingly, though, the British pound – with respect to the U.S. dollar - strengthened last week perhaps due to expectations the BoE will continue raising rates while the Fed pauses). For the week, the STOXX 600 Index increased 0.2% to 461.41, the FTSE 100 Index was fell 1.7% to 7,627.20, the 10-year Gilt rate rose 35bps to 4.34%, the 10-year Bund rate increased 11bps to 2.54%, the British pound and euro weakened 0.8% and 0.8%, respectively, both with respect to the U.S. dollar.

Top performing ETPs over the week

. 3x Long ETPs 3x Short ETPs
UK +3x Rio Tinto (3LRI) +8.1% -3x Vodafoe (3SVO) +15.7%
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The Long and Short of it, week ending 02 June 2023