The major U.S benchmarks had a positive week
Market Summary
Last week, the US and the Asian markets closed higher following the passing of the Debt ceiling agreement. EU markets closed mixed as high inflation remains a major concern.
The major U.S. benchmarks had a positive week, with the S&P 500 reaching its highest level since August 2022 and the Nasdaq Composite hitting its best level since April 2022. Rebounding job openings and better-than-expected nonfarm payrolls drew investors' attention.
The EU markets have mixed performances in major stock indexes. Eurozone inflation slowed in May, but European Central Bank (ECB) policymakers expressed concerns about high inflation.
Japanese equities rose with the Nikkei 225 Index rising 1.97% and the broader TOPIX Index up 1.72%, supported by strong domestic earnings and yen weakness.
Chinese equities rose following the passage of the U.S. debt ceiling legislation, but the official manufacturing Purchasing Managers' Index (PMI) fell for the second consecutive month.
Major News
President Joe Biden has signed a bill to suspend the U.S. debt limit, preventing a potential default on government obligations. The avoidance of a default eases concerns in financial markets and ensures the continued functioning of government operations.
The U.S. nonfarm payrolls saw a significant increase of 339,000 jobs, surpassing the anticipated figure of 190,000. This positive report indicates a strong recovery in the labour market. However, despite the impressive job gains, the unemployment rate also rose from 3.4% to 3.7%, suggesting a more challenging job market for workers.
China's factory activity contracted for the second consecutive month, with manufacturing purchasing managers' index (PMI) at 48.8 in May and non-manufacturing PMI for the service sector at 54.5.
What Caught Our Attention
China's prominent role as the largest producer and consumer of coal remains steadfast, driven by its abundant reserves, the need for affordable energy, and the challenges associated with scaling up alternative sources. Despite increasing pressure for divestment, financial institutions and investors continue to provide funding to coal companies, particularly in emerging markets where energy access is crucial for development. Political and regulatory dynamics in coal-dependent regions foster resistance towards transitioning away from coal, fuelled by concerns over job losses and potential social unrest.
Technological advancements play a significant role in the longevity of coal power generation. Advancements in coal-fired power plant efficiency and carbon capture technologies offer the potential for emissions reduction and an extended lifespan for coal. Although these advancements spark controversy, they provide a perceived bridge to cleaner energy sources.
Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia
