The Market View (June 3rd)

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The week in markets

UK election campaigning resumed on Monday. The key thing that involved the markets was new polling data from several organisations including YouGov, which showed that the Conservatives grip was slipping, losing support while Labour had gained it. Investors had been counting on a decisive Conservative victory under Theresa May, after local elections early last month showed they gained over 550 seats while Labour was decimated, losing over 300. However, a series of campaign blunders by May has allowed Labour to creep back up the rankings. Polls from the 1st of June showed Labour on 37% with the Conservatives on 43.2%. The Pound Sterling suffered from the polling data and dipped below $1.28 against the Dollar once again.

After Donald Trump’s meetings with NATO members rattled governments across the world, he announced that the US would be pulling out of the Paris Climate Agreement on Thursday. Naturally this was met with stern criticism globally, and the idea of a renegotiating of the deal was met with even less praise by EU leaders. Sadly for Trump, even though he began his speech in the Rose Garden by praising his administrations actions on the economy and mentioning the rally in US stocks, US nonfarm payroll data was released the following day which was less than stellar. Economists expected a gain of over 180,000 new jobs, but the figure came in at 138,000. As we all know, while the continuing rally on Wall Street points to investor optimism, it is only one indicator of how the economy is doing, not the whole story.

In the markets Amazon’s share price climbed above $1000 for the first time on May 30th. Many thought this was inevitable, given its $724 million profit for Q1 of 2017 which thrilled investors.

India’s NIFTY50 finished above 9,650 on the final day of trading on Friday – a record high up well over 15 per cent from 8,179 as of January 2, 2017. India’s economy is a continual success story, steaming ahead throughout global political volatility. It is still seen as one of the most appealing and dynamic emerging markets in the world for investors, and it’s economy continues to grow at one of the fastest rates of any country on the planet.

Midweek China’s latest manufacturing PMI’s fell short of expectations, driving down the price of mining stocks across the globe including bluechips in the FTSE100 like Anglo American, Rio Tinto and BHP Billiton. This was because China’s nationwide factory activity contracted in May for the first time in nearly a year, according to a private gauge that gave a weaker reading for the manufacturing sector than official data. The Caixin China manufacturing purchasing managers’ index fell to 49.6 in May from 50.3 in April, indicating a decline in activity according to Caixin Media Co. and research firm Markit on Thursday. A reading below 50 is usually bad news. The result was the first contraction of manufacturing activity in 11 months.

Events to watch next week

  • Monday – Service sector purchasing managers indices.
  • Tuesday – Eurozone retail sales data.
  • Wednesday – Eurozone GDP.
  • Thursday – UK General Election, ECB interest rate decision, Chinese trade balance.
  • Friday – Outcome of General Election and possible new UK government.

Company Results next week

  • Monday – Wizz Air.
  • Tuesday – AO World, Ryanair Holdings.
  • Wednesday – OMV AG.
  • Thursday – Auto Trader Group.
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