As we start a new week, let's take a look at the significant events in the global economy over the past week with our weekly financial update, presented by Bas Kooijman, the CEO and Asset Manager of DHF Capital SA.

The US stock market saw a positive week, with the S&P 500 nearing its all-time high and achieving its third consecutive week of gains. Other major indices also advanced, with value stocks generally outperforming growth shares. Despite the upward movement, trading volumes were notably low, with Wednesday recording the lowest notional value and third-lightest volume session of the year. This quiet trading week reflected a light and predictable economic calendar.

Some stocks experienced significant movements due to first-quarter earnings reports. Walt Disney's shares fell 9.5% despite beating earnings estimates, due to concerns over slowing subscriber growth in its streaming service. Similarly, Shopify's shares dropped 18.6% following predictions of slowing revenue growth.

The economic data highlighted some concerns, particularly with jobless claims rising to 231,000, the highest since August, and continuing claims breaking a four-week downward streak to reach 1.79 million. Additionally, the University of Michigan's consumer sentiment index for May fell sharply to 67.4, its lowest in six months, reflecting growing consumer concerns about inflation, unemployment, and interest rates.

In the bond market, the yield on the 10-year U.S. Treasury note remained relatively stable. Tax-exempt municipal bonds rallied despite heavy primary issuance, and investment-grade corporate bonds saw strong demand despite a busy issuance week. High yield bond market sentiment also improved as equities traded higher.

European markets had a strong week, with the pan-European STOXX Europe 600 Index rising by 3.01% thanks to better-than-expected corporate earnings and optimism about potential interest rate cuts by major central banks. Major indices like Germany’s DAX, France’s CAC 40, and Italy’s FTSE MIB also posted significant gains, while the UK’s FTSE 100 reached a fresh record high.

The Bank of England (BoE) kept its key interest rate at 5.25% but indicated potential policy easing in June. Deputy Governor Dave Ramsden's vote for a rate cut signaled a possible shift, aligning with his historical influence on the Monetary Policy Committee’s decisions. The BoE also revised its economic forecasts, predicting sharper declines in inflation rates for the coming years.

The UK showed signs of economic recovery, with a 0.6% GDP growth in Q1 2024, indicating the end of a recession that began in the latter half of the previous year. This growth was supported by expansions in services and production. Meanwhile, Sweden’s central bank, the Riksbank, cut its key interest rate by 0.25%, the first reduction since 2016, and suggested more cuts could follow if the inflation outlook remains favorable.

Chinese stocks advanced on recovery hopes bolstered by strong holiday spending during the Labor Day holiday. The Shanghai Composite Index rose by 1.6%, and the blue-chip CSI 300 gained 1.72%. In Hong Kong, the Hang Seng Index added 2.64%. The Ministry of Culture and Tourism reported a 7.6% increase in tourism revenue compared to the previous year's holiday, with domestic revenue up by 12.7% and international travel also seeing growth. However, average spending per traveler fell by 11.5% from 2019, indicating cautious consumer spending.

Economic data from China presented a mixed picture. The Caixin/S&P Global survey of services activity reached 52.5 in April, slightly down from March but still marking its 16th month of expansion. The composite PMI, which includes both services and manufacturing, edged up to 52.8 from 52.7, showing overall business activity growth.

Trade data exceeded expectations, with exports rising by 1.5% year-on-year in April, reversing a 7.5% decline in March. Exports to Southeast Asian nations improved, while shipments to Europe decreased and those to the US remained stable. Imports grew by 8.4%, beating expectations and reversing a decline in March, attributed to increased raw materials shipments. Consequently, China's trade surplus increased to USD 72.35 billion from USD 58.55 billion in March.

Overall, the global markets showed resilience and optimism, with varying performances influenced by economic data, corporate earnings, and central bank policies. The US market's steady climb, Europe's positive corporate earnings and potential policy easing, and China's recovery signals from holiday spending and trade data contributed to a broadly optimistic outlook.