Market Navigator: SpaceX IPO, Five Central Banks Convene

Summary

Last week saw significant market movements driven by key economic indicators and geopolitical developments. The US Consumer Price Index (CPI) rose to 4.2%, while the Producer Price Index (PPI) reached a three-year high. A peace framework between the US and Iran is set to reopen the Strait of Hormuz, which has implications for oil prices and market stability. The European Central Bank (ECB) also raised interest rates for the first time since 2023, indicating a shift towards tightening monetary policy.

Last Week's Recap

Geopolitical Developments

The US and Iran reached a peace agreement, leading to the cancellation of planned military strikes and the reopening of the Strait of Hormuz. This development contributed to a 6% drop in Brent crude oil prices, falling below $90.

US Inflation Data

The US CPI increased by 0.5% month-on-month in May, aligning with market expectations. The annual rate of inflation now stands at 4.2%, primarily driven by rising energy prices. The core CPI rose to 2.9% year-on-year, while the PPI surged 6.5% annually, marking the highest increase since November 2022.

China's Economic Challenges

China's PPI rose 3.9% year-on-year in May, influenced by rising commodity costs due to the Iran conflict. However, the CPI remained low at 1.2%, indicating a significant margin squeeze for manufacturers who struggle to pass on costs to consumers.

ECB's Policy Shift

The ECB raised its deposit facility rate by 25 basis points to 2.25%, citing inflation pressures from the Middle East. The bank's projections suggest an average inflation rate of 3.0% for 2026, with no immediate second-round effects on wages observed.

Markets in Focus

SpaceX IPO

SpaceX's IPO raised a record $75 billion, making it the largest in history. The offering was oversubscribed by more than four times, leading to a 19% increase in share price on its first trading day. This event is expected to trigger significant passive fund buying, estimated at around $25 billion in the coming weeks.

US Equity Markets

US equities experienced volatility, with the S&P 500 rising 0.6% and the Nasdaq 100 gaining 2.3%. Despite a sharp sell-off earlier in June, the US Tech 100 index found support near 28,000 and is testing resistance levels.

Hang Seng Index Performance

The Hang Seng Index fell 1.0%, marking its fifth consecutive weekly loss. Notable declines included Lenovo and Alibaba, while Longfor Group and Chow Tai Fook saw significant gains due to positive sales reports.

The Week Ahead

Five major central banks are set to meet this week, with the Bank of Japan expected to raise rates to 1.00%. The Federal Reserve, Reserve Bank of Australia, and Bank of England are anticipated to maintain current rates. Additionally, China's May economic data will be closely monitored for signs of recovery or further deterioration.