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Market Updates for the week ending 27 May 2022

US equities indexes jump, snap weekly losing streak

US equities closed higher on Friday as signs of peaking inflation and consumer resiliency sent investors into the holiday weekend with growing optimism that the Federal Reserve will be able to tighten monetary policy without tipping the economy into recession.

All three major U.S. stock indexes brought a decisive end to their longest weekly losing streaks in decades. the S&P 500 gained 6.58%, the Nasdaq Composite rose 6.84%, and the Dow Jones Industrial Average rose 6.24%.

US two-year treasury yields fell to 2.48%, while the yield on benchmark 10- year Treasury notes was last 2.74%.

It had hit a three-year high of 3.20% earlier this month on fears that the Fed may have to raise rates rapidly to bring inflation under control.

The tech-heavy Nasdaq surged the most - its advance was powered by gains in Apple Inc, Tesla Inc, and Inc.

Upbeat guidance from retailers appeared to offset warnings from their peers in recent weeks with department store operator Macy's Inc jumping 19.3% after raising its annual profit forecast.

Discount chains Dollar General Corp and Dollar Tree advanced by 13.7% and 21.9%, respectively, following their annual sales forecast hikes, suggesting consumers are shopping for less costly goods amid decades-high inflation.

Consumer spending increases 0.9% in April

Positive economic indicators have fuelled hopes that the Fed's hawkish manoeuvres to contain decades-high inflation will not cool the economy into contraction.

Data released on Friday showed consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.9% last month.

Data for March was revised higher to show outlays outpacing 1.4% instead of 1.1% as previously reported.

Goods spending increased a solid 0.8%, driven by new motor vehicles, clothing, footwear, recreational goods as well as furnishings and household equipment.

Demand for goods remains strong even as spending on services is picking up. Service outlays rose 0.9% as consumers frequently dined out and travelled.

There was also increased spending on housing and utilities, and recreation services.

PCE price index indicates inflation peaked in March

Although inflation continued to increase in April, it was not at the same magnitude as in recent months.

The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain in November 2020, after shooting up 0.9% in March.

European equities end the week higher

European equities represented by the Stoxx 600 hit a three-week high and rose 2.98% for the week.

Equity markets rose last Thursday with the retail sector leading the charge as Britain revealed new stimulus plans.

Retailers advance as the UK unveils new stimulus

Shares in British retailers rallied on Thursday in hopes that a new 15 billion pound ($19 billion) package of support for households struggling to meet soaring energy bills will encourage them to keep spending.

Britain announced a 25% windfall tax on oil and gas producers' profits alongside the package of household support.

That sparked a rally in retail stocks that have been battered in recent months over the feared repercussions of the cost-of-living crisis.

China embassy: “Common interests and profound cooperation potential should be used to define China-US relations”

Asian equities also benefited from China’s embassy response to Secretary of State Antony Blinken’s long-awaited speech on U.S. strategy to address China's rise.

Asian equities represented by the MSCI Asia ex-Japan index were up 0.19%.

In response to Secretary of State Antony Blinken's statement on Thursday that the United States will not block China from growing its economy, but wants it to adhere to international rules.

China's Washington embassy said the United States and China shared "extensive common interests and profound cooperation potential" and "that competition should not be used to define the overall picture of the China-U.S. relations."

Chinese equities represented by the MSCI China Index were down marginally at -0.50%.

Alibaba Group shares soar 15% on revenue, earnings beat

Markets focused on Alibaba's quarterly revenue and earnings beat in a sharply weakening economy which saw its shares surging 15% after analysts said that the results were more resilient than expected.

This was despite Alibaba Group (9988.HK) on Thursday saying it would not provide a forecast for the current fiscal year because COVID-19 risks clouded its outlook, after reporting its slowest quarterly revenue growth since going public in 2014.

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