Strong growth and inflation surprises contributed to solid performance of major benchmarks

Market Summary

Last week, the US closed higher following favourable inflation data. The EU and Asian markets also closed higher as hopes that China will do more to boost consumption grow.

In US, strong growth and inflation surprises contributed to the solid performance of major benchmarks, with the S&P 500 and Nasdaq Composite leading the way. Notably, Apple reached a market capitalization above $3 trillion, surpassing several sectors of the S&P 500.

In Europe, the STOXX Europe 600 Index gained 1.94% while other major stock indexes, including CAC 40, FTSE MIB, DAX, and FTSE 100, also posted positive returns. The Eurozone's annual inflation slowed for the third consecutive month. However, the ECB hinted at further interest rate hikes.

Japanese equities performed well, with the Nikkei 225 and TOPIX Index both rising. However, yen weakness against the U.S. dollar raised concerns, leading to discussions about potential intervention by the Bank of Japan.

Chinese stocks generally had a positive performance, with weak economic indicators offsetting optimism for potential government measures to boost growth. The official manufacturing PMI improved slightly, while the nonmanufacturing PMI decreased.

Major News

The number of new applications for US unemployment aid came in lower than expected, indicating ongoing resilience in the labor market. Initial state unemployment claims totalled 239,000, down from the previous week's high. This puts pressure on the Federal Reserve to continue its rate-raising efforts.

Top central bank chiefs, including US Federal Reserve Chair Jay Powell and ECB President Christine Lagarde, have expressed their readiness to raise interest rates. They cited concerns about tight labor markets driving up wages and prices.

China's manufacturing sector experienced a contraction for the third consecutive month in June, as reflected in the official purchasing managers' index (PMI) of 49. The non-manufacturing PMI slightly fell short of expectations at 53.2. 

What Caught Our Attention

Despite the EU ban on imports of refined oil from Russia, the country has managed to redirect its diesel exports to new buyers. South American and North African countries, as well as Turkey and Gulf states like Saudi Arabia, have emerged as purchasers of Russian diesel. Creative techniques, such as ship-to-ship transfers and the use of fake location signals, have been employed to circumvent restrictions.

Russia's export machine has enough ships to support this trade, and major traders like Gunvor and Vitol have continued to buy Russian oil products. However, this resilience in the face of sanctions may lead to an oversupply of diesel, putting pressure on Europe's and rich Asia's refiners. Refining margins have significantly decreased, impacting the profitability of the industry.

Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia