Commentary: DM equities lose the ground
Developed market (DM) equities declined during last week, with Europe largely underperforming. In the US, the better-than-expected results from Tesla and Rivian Automotive managed to boost the equity market slightly, however, discouraging news from AstraZeneca’s new cancer drug weighed heavily on health care stocks.
In terms of macroeconomics, the hawkish tone in FOMC minutes was last week’s major negative catalyst. The highlight of minutes was Dallas Fed President Lorie Logan’s anticipation of two more rate hikes in 2023. As a result, markets are now pricing a 90% probability of 25bps hike in July, while the likelihood of another hike during the year stands roughly at 1/3.
On a positive note, the US non-farm payrolls came in below expectations with only 209,000 newly employed in June (vs 225,000 forecast and down from May’s 306,000). Importantly, the June figure is the lowest since December 2020. On the flipside, the unemployment ticked downwards from 3.7% to 3.6%, while average hourly earnings grew by more than expected rate of 4.4% y/y (vs 4.2% forecast). Given the contrasting information from the US labor market, the overall impact on equities was negligible.
