What mattered last week and a preview of the week ahead

What mattered last week:

  • The S&P500 finished the month of May almost 5% higher, building on the strong rally in April.
  • Buoyed by prospects of a vaccine for COVID-19 and optimism about the re-opening of the global economy.
  • As well as economic data that suggests that April was the trough for growth and that a recovery is underway.
  • Offsetting another escalation in U.S. and China tensions.
  • Volatility, as measured by the VIX index, closed relatively unchanged at 27.5.
  • U.S. 10-year yields closed relatively unchanged at 0.66%.
  • In the reverse of the previous week's price action, gold fell in the early part of the week before a  late recovery that enabled gold to finish relatively unchanged near U.S $1730.
  • A fifth straight week of gains for crude oil futures, closing at U.S $35.49/bbl.
  • The ASX200 rose 4.70% to close above 5750, supported by a strong gains in the “Big 4” banks.
  • In FX, the AUDUSD traded to its highest level since early March, closing near .6670.

For the week ahead, the key events are:

A key focus of traders this week will be on the continued reopening of economies and evidence of an economic recovery.

Australia: Business inventories, current account, RBA interest rate meeting (Tuesday), Q1 GDP, and building permits (Wednesday), balance of trade (Thursday).

  • RBA interest rate meeting (Tuesday): The RBA is expected to keep interest rates on hold at 0.25% and maintain a dovish bias.

New Zealand: Building permits and terms of trade (Tuesday).

China: Caixin manufacturing PMI (Monday), Caixin services and composite PMI (Wednesday).

Japan: Capital spending (Monday), leading economic index (Friday).

U.S: ISM (Monday), factory orders (Wednesday), non-farm payrolls (Friday).

  • Non-Farm Payrolls (Friday): Payrolls are expected to fall by 8,250,000 resulting in the unemployment rate rising from 14.7% to 19.7%!

Canada: Markit manufacturing PMI (Monday), BoC interest rate meeting (Wednesday), balance of trade (Thursday), employment (Friday).

Euro Area: German and EA employment (Wednesday), ECB interest rate decision, and EA retail sales (Thursday), German factory orders (Friday).

  • ECB interest rate meeting (Thursday): The tone of recent ECB communique has been dovish and with next week's updated staff forecasts likely to including a huge cut to growth and inflation forecasts, watch for the ECB to increase the PEPP program by as much as €750bn.

UK: Nothing of note.

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