The Long and Short of it, week ending 16 June 2023
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Stock markets charged higher last week with all 3 major stock indexes moving higher every day last week but Friday. Falling inflation levels as revealed by both CPI and PPI releases last week helped propel stock prices higher last week despite hawkish comments from Fed Chairman Powell increasing expectations of at least 2 more rate hikes. Market sentiment, nonetheless, seemingly dismissed concerns surrounding those expectations focusing on overall declining inflation, relatively strong economic data (i.e., better-than-expected retail sales, sharply higher consumer sentiment and robust second quarter GDP growth forecasts) and, perhaps, the Fed’s concerns regarding regional banks. The U.S. dollar, too, moved past higher-rate concerns, weakening over 1% during the week while 10-year U.S. Treasury rates were basically unchanged. For the week, the S&P 500 Index increased 2.6% to 4,409.59, the Nasdaq Composite Index rose 3.3% to 13,689.57, the Dow Jones Industrial Average increased 1.3% to 34,300.76, the 10-year U.S. Treasury rate increased 3bps to 3.77% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 1.3%.
European stock markets moved higher last week as well. Both the STOXX 600 and FTSE 100 Indexes benefited from favourable U.S. inflation data, an as-expected Fed rate decision (unchanged) and Chinese monetary and fiscal stimulus. The FTSE 100 Index, which moved higher every day last week, rose on strong energy and mining stock performance (pushed higher by Chinese stimulus and surging refining operating rates) and despite a noticeably stronger British pound. Stronger-than-expected UK labour market data increased concerns of continued BoE rate hikes, capping gains on the week. The STOXX 600 Index moved higher every day last save Thursday following the ECB’s rate announcement. Though the ECB raised rates as expected (25bps), hawkish comments from ECB President Lagarde weighed on market sentiment, pushing the STOXX 600 Index slightly lower on the day. European markets also moved higher on the back of mining and energy stock performance but also on strong luxury stock performance (also a result of Chinese stimulus measures). Both the euro and the British pound strengthened last week (versus the U.S. dollar), rising on the seemingly divergent paths of the Fed and the ECB and BoE. For the week, the STOXX 600 Index rose 1.5% to 466.80, the FTSE 100 Index increased 1.1% to 7,642.72 the 10-year Gilt rate rose 17bps to 4.41%, the 10-year Bund rate increased 8bps to 2.46%, the British pound and euro strengthened 2.1% and 1.8%, respectively, both with respect to the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Glencore (3LGL) | +22.6% | -3x BP (3SBP) | +10.1% |
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The Long and Short of it, week ending 16 June 2023
