Research Market strategy
By Swissquote Analysts
Published on 31.05.2021
Morning news

China’s Factory Activity Slipped in May, but Consumer Spending Held Up

Topic of the day

An official gauge of Chinese factory activity slipped in May on weaker export demand and higher commodity prices, while the country’s nonmanufacturing sector was bolstered by stronger construction and holiday spending. China’s official manufacturing purchasing managers index slipped slightly to 51.0 in May from the previous month’s 51.1 reading, according to data released Monday by the National Bureau of Statistics. The result was largely in line with the 51.1 median forecast expected by economists polled by The Wall Street Journal, and marked the 15th straight month that the gauge came in above the 50 mark that separates expansion from contraction. A recent surge in prices for raw materials such as iron ore, crude oil and coal sent the subindex for input prices to 72.8 in May, the highest level since November 2010, while output prices notched up a record-high reading of 60.6, according to Monday’s PMI data. China’s cabinet, the State Council, pledged this month to stabilize high-flying commodity prices by cracking down on speculators and those hoarding raw materials.

Swiss stocks

Declining Corona statistics in Europe and strong U.S. economic data gave the Swiss stock market a strong tailwind on Friday. The SMI gained 0.8 percent to 11,426 points. At 11,444 points, the index reached a new record high. Among the 20 SMI stocks, there were 18 price gainers and one loser, with one share closing unchanged. 36.35 (previously: 69.52) million shares were traded. Investors particularly grabbed shares of companies that are expected to benefit most from the lifting of pandemic-related restrictions. In the SMI, Richemont (+2.4%) and Swatch (+3.2%) led the way. Among small caps, shares of duty-free store operator Dufry improved 1.9 percent. Pharmaceutical stocks Alcon (+1.9%), Lonza (+1.7%) and Roche (+0.8%) were also in demand. Novartis, on the other hand, showed only maintained. Nestle, considered a defensive heavyweight, posted a gain of 0.5 percent. Other defensive stocks lagged the broad market: SGS closed unchanged, Swisscom rose 0.2 percent. In the banking sector, Julius Baer gained 1.3 percent. In return for a payment of around 80 million dollars, the U.S. judicial authorities are dropping the investigation against Julius Baer in the Fifa case.

International markets


European stocks hit a fresh record high on the last trading day of May, tracking a mostly positive session in Asia and gains on Wall Street as economic optimism continues to override inflation concerns. Investors are waiting for an update on the personal-consumption expenditures price index, the Federal Reserve's preferred gauge of inflation. Investors are concerned that persistent price pressures could prompt the Fed to pull back on its accommodative policy, despite reassurances from the central bank that it's in no hurry to do that. But as inflationary pressures "bubble under the surface," investors have been trying to prepare for all eventualities, flipping into value stocks that are geared at economic recoveries and out of growth stocks, said Richard Hunter, head of markets at Interactive Investor, in a note to clients. "The renewed consideration of cyclical stocks as an investment destination has generally played into the hands of the FTSE 100, which has now risen by 9% in the year to date. The index is replete with sectors falling into the recovery category, such as the banks, oils and miners," said Hunter. U.S. markets will be closed on Monday for the Memorial Day holiday, which also marks the start of traditional summer vacations. The U.K. will also observe a bank holiday on that same day, with those markets closed. Among European stocks on the move, shares of banking giant HSBC climbed more than 2%, with industrial conglomerate Siemens jumping nearly 4%.

United States

The S&P 500 edged higher in the final trading day of the week, notching a fourth consecutive month of gains. The broad stock-market gauge added 3.23 points, or 0.1%, to 4204.11. The tech-heavy Nasdaq Composite gained 12.46 points, or 0.1%, to 13748.74. The Dow Jones Industrial Average gained 64.81 points, or 0.2%, to 34529.45. The S&P 500 and Dow clinched gains for the month of May, while the Nasdaq logged a decline, snapping a six-month streak of wins. The month has been marked by big swings in everything from stocks to bitcoin. Worries about inflation injected a jolt of volatility to markets earlier in May, though major U.S. indexes have regained their footing since as investors rapidly stepped back into markets. The Federal Reserve’s preferred measure of inflation—the price index for personal-consumption expenditure, excluding food and energy—rose 3.1% from a year earlier. A surge in demand after Covid-19 restrictions were lifted, coupled with supply chain strains, likely led to a rise in prices last month. A dizzying run for meme stocks continued this week. AMC Entertainment slipped Friday after closing at the highest level in four years the prior session. The shares have more than doubled this week, closing at $26.12 Friday. Ulta Beauty shares rose $17.00, or 5.2%, to $345.36 after the beauty retailer swung to a profit during its latest quarter, as sales picked up with the economy rebounding. shares jumped $12.27, or 5.4%, to $238.10 after the cloud-software company reported first-quarter results and a second-quarter outlook that beat analysts’ forecasts. U.S. markets will be closed on Monday for the Memorial Day holiday, which also marks the start of traditional summer vacations.


At the beginning of the new trading week, the Asian stock exchanges show slight losses. the Shanghai Composite loses 0.2 percent. In Hong Kong, the Hang Seng Index lost 0.5 percent. After the significant plus of 2 percent at the end of the previous week, the Nikkei 225 is down 1.1 percent.


Yields for U.S. government debt edged lower Friday, as investors pored over another reading of inflation, affirming that price pressures are gathering, though market participants view them as transitory. Bond markets closed an hour early on Friday at 2 p.m. Eastern Time, in observance of the Memorial Day holiday. The 10-year Treasury note ticked down to 1.592% from 1.609% Thursday.


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