Equity markets are currently displaying a subdued sentiment as we commence the final week of trading in the second quarter. Last week we witnessed a significant downturn in equities, marking their worst performance since the mid-March 2023 Silicon Valley Bank collapse. The combination of apprehensions about economic growth and a tighter monetary policy has prompted bullish investors to adopt a more cautious approach. The six-week rally that preceded this period seems poised to take a breather, potentially leading to a phase of consolidation as we enter the traditionally sluggish summer months.
Over the weekend, the news was dominated by developments in Russia, where President Vladimir Putin faced a rebellion by the Wagner group militia. Secretary of State Antony Blinken remarked that this incident exposes cracks in Putin's rule. However, the market has not yet reacted to this news, with Brent crude prices remaining stable and Eurozone natural gas experiencing only a modest 3% decline during the trading session. Nevertheless, market attention is once again shifting toward the situation in Ukraine as this new twist unfolds.
Economic data continues to weigh on market sentiment, exemplified by Germany's IFO Survey, which marked the country's second consecutive poor data point in as many days, following the disappointing PMI figures released on Friday. As Germany is China's largest trading partner, market participants interpret this as an indication that the world's second-largest economy remains under pressure. Consequently, market watchers are keeping a close eye on China, anticipating further stimulus measures. Although the Chinese government has hinted at implementing additional market support, aside from a few interest rate cuts, no substantial actions have been taken thus far. Chinese markets reopened following the Dragon Boat holiday and recorded losses of 1.5%. Reports on consumer spending during the holiday period were mixed.
Adding to the cautious sentiment, the Blue Chip Market Signal indicator has shown signs of concern, while the MACD sell signal was triggered for the Nasdaq index.
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