Week ending 4th June 2021.

Thankfully it was a holiday-shortened week as equity markets lacked direction as all eyes were focused on today’s (Friday 4 June 2021) US employment data.

As we reported on 7 May 2021 (please see here), April’s US employment data was a big disappointment after employment growth came in at just 266,000 versus economists’ expectations of a 1m gain – and as economists brushed this aside as an anomaly, given the strong string of other economic data readings, the same economists expected a strong May reading, with a 674,000 gain.

As it turned out, May’s report showed an employment gain of 559,000 – while this is below the consensus estimates, we don’t believe it is a bad result:  it was only a moderate miss and it clearly highlights that employment growth is picking up.

However, as we explained last month, this ‘bad news’ is actually good news, as it should hopefully ease the markets’ recent concerns about out-of-control inflation.  In fact, this data reading adds to our conviction that the current inflationary pressures will prove temporary and as such, the Fed (along with other central banks, such as the BoE, ECB and BoJ) will remain accommodative by keeping interest rates low.

As a consequence, aside from the usual everyday risks such as an escalation of geopolitical tension with China or Iran; or a new coronavirus variant, we see it hard to find a reason why global equity markets can’t make progress in the coming months.

Focusing on the week ahead, we have UK Industrial & Manufacturing data along with GDP for April; US & Chinese CPI inflation readings; the University of Michigan Consumer Expectations Index; Chinese trade data; and an ECB monetary policy meeting.

Investment Management Team

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