Commentary
Last week saw modest declines in developed markets equities, while EM stock markets delivered more sizeable drops. In the US, small-caps outperformed their larger peers, as Russell 2000 (a small-cap US benchmark) managed to gain half a percent during the week, while S&P 500 lost 0.7%. Among S&P 500 stocks, the decline was quite symmetric in terms of both size and sectors. Energy and Utilities, however, were outliers as rising oil price pushed former to rally while pulling the latter downwards. The treasury yields generally rose alongside the fall in equities, with 10 and 30-year notes now yielding 4.59% and 4.73%, respectively.
Importantly, however, the general picture of the US economy remains more positive than what was expected at the beginning of the year. Despite the recent upwards revision of expected Fed rates, healthy consumer balance sheets and resilient business profit margins give higher hopes for the soft-landing scenario. On the other hand, economic activity in Euro area displays weaker momentum, as illustrated by manufacturing and services PMIs and retail sales data.
