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• Market Recap

Stock markets were mixed for the week. In the US, the market fell sharply on Friday following the release of a monthly report on inflation that was worse than most economists had expected. Meanwhile, stocks in China rallied amid hopes for looser monetary policy and signs that Beijing was easing its years-long crackdown on the technology sector.

• News

Last week, the biggest market-moving economic data arrived on Friday, with the release of the US consumer price index (CPI) inflation reading for the month of May. The inflation data broadly came in hotter than expected, with the headline figure coming in at 8.6% year-over-year, above expectations of 8.2%, while core CPI (excluding food and energy) came in at 6.0%, slightly above the 5.9% forecast.

• Geopolitics

UK Prime Minister Boris Johnson survived a no-confidence vote early in the week, securing 211 Tory MPs’ votes in his favour (more than the necessary 180 votes to remain in office). However, 148, or 41%, of his MPs voted to oust the Prime Minister, in a worse result than Downing Street had hoped.

• Inflation

Inflation in the US unexpectedly accelerated to 8.6% in May of 2022, the highest since December of 1981. Headline inflation is being driven by rising oil and food prices and has moved higher over the last few months, while core inflation has shown signs of very gradual easing. Of note, this month we saw the widest differential between headline and core inflation that we've seen in the past 10 years.

• Central Banks

Inflation is continuing to run hot, so US central bankers are widely expected to approve an interest-rate increase of at least half a percentage point at Wednesday’s US Federal Reserve policy meeting. It would be the second half-point increase in a row — twice as big as the quarter-point increases that the Fed has typically implemented when raising rates. 

• Commodities

The oil price fell 2% to $119 a barrel on Friday. In China, Shanghai reimposed fresh lockdowns in parts of the city, and announced a round of mass testing for millions of its residents, which is expected to reduce oil demand. Still, the oil price was close to a three-month high of $123 on June 8th, as demand remains strong in the US amid the peak summer driving season, with US petrol stockpiles at the lowest seasonal level since 2014.

• ESG

TotalEnergies supplied the fuel for the first ever 24 Hours of Le Mans motorsports endurance race, in which each car was powered with 100% renewable fuel. The zero-oil fuel is produced from agricultural waste, including residues from the wine industry, and blended with ETBE, a byproduct made from ethanol produced at TotalEnergies’s Feyzin refinery near Lyon, France.

 

• Week Ahead

All eyes will be on the US Central Bank this week, as they conclude their two-day interest rate policy meeting on Wednesday. They are largely expected to raise interest rates by 0.5% to 1.5%. Investors will pay close attention to guidance on what comes next for interest rates. In the UK, interest rates are expected to rise for the fifth time in a row by 0.25% to 1.25%.