Weekly Digest - INVESTEC
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On Friday, the US S&P 500 equity market gained 1.05%, taking the week’s return to 4.4%. There were two key drivers for this strength: the disappointing US employment data (non-farm payroll number), leading to increased confidence that the US Federal Reserve will ease policy this year, and the abrupt cessation of the US – Mexico trade impasse. This momentum spilled over to the Far East and European bourses today (though some European exchanges, notably Germany, have been closed).
It would be comforting to think that a similar kind of accord might be reached between the US and China when their respective Presidents meet at the end of this month at the G20, but with both sides of that dispute acutely concerned about saving face, and China in a stronger negotiating position than the Mexicans, this may be wishful thinking. Ahead of the G20 though, Treasury Secretary Mnuchin has reported candid and constructive talks with his opposite numbers.
Overnight, China released trade data for May. Exports increased more than expected, which probably reflects a pulling forward of demand ahead of the tariff increases, whilst imports saw a sharp decline of 8.5%. With regard to the US specifically, the pace of export declines moderated and, having contracted by 13.1% in April, they were only down 4.2% in May (year-on-year).
We have a raft of economic releases this week, including UK Unemployment data on Tuesday and US inflation data on Wednesday. The company reporting schedule is lightly populated but contains several names of interest to us, with Halma on Tuesday, British American Tobacco and Inditex (brands including Zara) on Wednesday, and Tesco on Thursday.