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Team Asset Management offer their weekly round-up of global markets
GLOBAL stocks extended their gains after US lawmakers reached a compromise on the debt ceiling bill, averting a first-ever default by the US government. The monthly nonfarm payrolls report provided more good news on Friday and the blue-chip S&P 500 Index gained 1.6% over the week.
Technology stocks outperformed, attracting more interest from investors seeking exposure to artificial intelligence, and the Nasdaq climbed 2.0%, reaching its highest level since April last year.
The protracted negotiations to reach a deal to increase the US debt ceiling became more urgent in recent weeks with the US government expected to run out of money by Monday 5 June. Deeply entrenched positions on both sides required compromises to be made and the fast-approaching deadline eventually made this possible.
The House of Representatives voted in favour of the deal on Wednesday and the Senate approved it a day later. President Biden signed the bill into law over the weekend with just days to spare. The relief in the markets was palpable.
Aside from uncertainty over the debt ceiling, markets have also been held back by growing concerns that the world’s largest economy would fall into a recession. However, another surprisingly strong jobs report for May suggested it continues to be resilient to higher interest rates and inflation.
The US added 339,000 new jobs last month, according to the report, almost twice as many as expected, and figures for earlier months were also revised higher. The US economy has now added workers for 29 consecutive months.
A resilient employment market is important, as personal consumption accounts for more than two-thirds of the economy. Consumers are more willing to spend and dip into savings, or borrow money when they feel more confident about their job prospects.
Apple shares climbed to a record high of $184 ahead of the release of its augmented-reality headset on Monday. The Vision Pro, its first major new product launch since the Apple Watch in 2014, will cost $3,499 and blends the real and virtual worlds.
Scheduled to be available from early next year, it will enable users to immerse themselves in games, sports and movies. Disney chief executive Bob Iger appeared at its launch and announced that Disney+ would be available from day one.
Apple’s shares have risen 38% so far this year, pushing its market value up to $2.8 trillion.
It wasn’t such a good week for Diageo, the owner of brands including Johnnie Walker, Guinness and Tanqueray gin, as its shares fell nearly 5% to a two-year low of £33.32.
US rapper and producer Sean ‘Diddy’ Combs filed a lawsuit in New York against Diageo alleging racial discrimination and undermining joint-venture spirits brands DeLeon tequila and Ciroc vodka. The filings allege that Diageo has typecast the spirits as ‘black brands’, saying they should be targeted only to ‘urban’ consumers, while it has dedicated more resource to other celebrity brands, including George Clooney’s Casamigos tequila, now the top-selling US tequila brand. Diageo categorically denied all allegations.
Diageo also announced on Monday that its new chief executive, Debra Crew, had assumed her role a month earlier than expected, as outgoing chief executive Sir Ivan Menezes required emergency surgery. Crew oversaw Diageo’s North American operations and has previously held positions at PepsiCo, Kraft Heinz and Nestlé. Shareholders will be counting on her to drive improved performance at a time when premium-brand sales are slowing in key markets, including North America and China.
Brent crude prices edged lower to $76 a barrel after the Opec+ cartel made no changes to its planned production cut for this year at its meeting in Vienna over the weekend. Only Saudi Arabia, its largest producer, announced it would voluntarily cut its production by one million barrels a day in a bid to support oil prices. The IMF forecasts Saudi Arabia requires an oil price above $80 to balance its budget and fund its Vision 2030 mega projects.
