US

The minutes of the Fed's latest meeting revealed no further hawkishness within the Board. The news eased market concerns over larger rate hikes and US equities rebounded, with the Dow, S&P 500, and NASDAQ up 4.43%, 4.03%, and 3.09% respectively over the past 5 days ending Thursday. According to the minutes, many officials agreed that a 50 bps rate hike at each of the next two meetings would provide policy flexibility for later in the year. Fed official Raphael Bostic suggested that rate hikes could be suspended in September, but that this would depend on inflation by then.

On the economic front, US GDP was further revised down to a 1.5% QoQ contraction in Q1, versus market expectations for an upward revision to -1.3%. In addition, the latest Purchasing Managers' Indices (PMIs) also showed deceleration in the economy, with the manufacturing PMI falling to 57.5 in May from 59.2 in April; the services PMI in May also fell to 53.5 from 55.6; and the composite PMI fell to 53.8 from 56.0, reflecting declining activity in the US as a whole. The weak data raised market concerns about a possible recession, and will keep an eye on the trend of economic data and the Fed's policy direction. Next week, the US will release its Consumer Confidence Index, ISM Manufacturing and Services Index, Employment data, as well as the Beige Book.

Europe

The rebound in European stocks was limited as market sentiment cooled following the rebound in the Euro, with ECB President Christine Lagarde's signalling that rate hikes may begin in July. In the past 5 days ending Thursday, the UK, French, and German indices gained 1.78-2.37%. Besides indicating a possible rate hike in July, Lagarde also suggested that negative interest rates would cease by the end of September. In an earlier blog post on the ECB's website, Lagarde hinted at a 25 bps rate hike both in July and September. Given the current official rate of negative 0.5%, the ECB would need to raise interest rates by a total of 50 basis points to exit negative interest rates by the end of September, the market will likely keep an eye on the ECB's policy stance. Next week, the Eurozone will announce the CPI for May.

China

Alibaba's positive quarterly earnings and a rebound in the US market boosted sentiment in the Hong Kong equity market, with the Hang Seng Index rebounding 2.89% on Friday, narrowing the week's loss to minus 0.1%, whereas China's A-shares remained under pressure, the CSI 300 Index fell 1.87% for the week. The impact of the epidemic was compounded by weak economic data in China, industrial profits fell by 8.5% YoY in April, the first contraction since early 2020. Earlier in the week, Premier Li Keqiang announced a package of further measures to stabilise the economy, including a tax rebate of over 140 billion yuan. Next week, China will release official and Caixin manufacturing PMI data.