Global Macro Monitor: Weekly Update – June 6

The S&P 500 closed at 6000.4 on Friday, marking a significant psychological level with a 1.5% weekly gain. The strong performance was primarily driven by a short-covering bid, which reflects some big players are way offside, in our opinion.  The rally gained momentum towards the end of the week, following a solid employment report (+139,000 jobs), which exceeded market expectations. Despite this, the employment data saw revisions downward for previous months’ data, and the job growth was increasingly concentrated in just two sectors: leisure and hospitality, and healthcare.

As we move into the next week, maintaining the 6000-level will be critical for the S&P 500. If the index can consolidate above this level, it increases the possibility for new highs as we move through the summer months. However, failure to hold this level might signal a shift in market sentiment that stocks cannot break through the top of the trading range.  The upcoming CPI report is likely to play a crucial role.

Dollar

The dollar showed signs of weakness this week, particularly against EM currencies.  The almost flat performance of the dollar index was distorted by Dollar/Yen strength, which appreciated 0.6% on the week.  The dollar’s broader softness was notable, especially against emerging market currencies. This likely reflects a strong appetite for emerging market assets as global investors seek higher returns amid increasing risk appetite.

The dollar’s weakness against EM currencies suggests a shift in global capital flows. Emerging markets are poised to benefit from a stronger carry trade environment, while the U.S. faces mounting inflation risks that could further affect the currency’s value.

AI Trade

Across global risk markets, one theme continues to dominate: the AI trade. U.S. technology stocks linked to AI growth saw strong performance, particularly in sectors like information technology (+3.0%), communication services (+3.2%), and electronics technology. Asian markets, particularly Taiwan and Korea, also surged in tandem with strong demand for semiconductors and digital infrastructure driven by AI innovation.

Despite these advancements, there is still a significant underappreciation of AI’s economic impact in the market. AI technologies are not just reshaping industries but are poised to transform global productivity in ways that may not be fully captured in current market valuations. As AI continues to drive both corporate earnings and productivity gains, it is likely to become an even more dominant macro driver than traditional factors like inflation or trade tensions.

Global Markets

In Europe, the European Central Bank (ECB) continued its easing cycle, reducing its Deposit Rate by 25 basis points to 2.00%, citing softer inflation but maintaining a modest easing bias. With core inflation slowing to 2.3%, the ECB is expected to pause rate cuts in July, but a final reduction in September remains likely.

Across emerging markets, the week saw a broad rally in stocks, with EM equities rising 2.3%. This was led by Korea and China, whose currency movements and strong equity performances indicate growing investor confidence in the region despite broader global uncertainties. As EM currencies continue to outperform the U.S. dollar, the global risk appetite for these regions may remain robust, further supported by easing inflation in several key markets.

Key Takeaways

• The 6000 threshold for the S&P 500 is crucial. Maintaining this level could set the stage for new highs, while a failure to hold it may signal a shift in market dynamics.
• Emerging market currencies are seeing strong inflows, especially with the dollar weakening. This could continue if inflation data supports a dovish Fed stance.
• AI continues to be a macro driver underappreciated by the markets. As this sector evolves, it may significantly outperform broader market expectations.
• European and emerging market assets are showing resilience. The ECB’s stance and strong performances in Asia and EM currencies highlight opportunities in these regions.

As we head into the week ahead, all eyes will be on CPI data and further economic developments that may shape the outlook for the global economy, particularly in terms of tariffs, inflation, and central bank policy

Markets

U.S. Market Analysis

• S&P 500 closed at 6,000.4, up +1.5% for the week and +2.02% YTD
• Nasdaq Composite gained +2.2%, supported by strength in information technology and AI-related stocks.
• Russell 2000 (small-cap index) rose +3.2%, outperforming large caps but remains down over 4% YTD.
• Weekly gains were concentrated in:
  • Information Technology: +3.2%
  • Communication Services: +3.2%
  • Materials: +1.7%
• Lagging sectors:
  • Consumer Staples: –1.4%
  • Utilities: –0.9%
• Cboe Volatility Index (VIX) fell to 16.8, down from 18.6, indicating reduced market anxiety.
• Rally was driven by:
  • May nonfarm payrolls: +139,000 jobs (vs. 130,000 est.)
  • Prior months revised down by –95,000
  • Unemployment rate held at 4.2%

Global Market Analysis

• MSCI EAFE Index (Developed ex-US): +0.7% weekly return, +18.2% YTD
• Eurozone:
  • Germany: +1.5%, +34.1% YTD
  • Italy: +1.3%, +34.7% YTD
  • France: +1.0%, +19.5% YTD
• Emerging Markets (MSCI EM Index): +2.3% weekly, +11.4% YTD
  • China: +2.5%
  • Korea: +6.5%
  • Brazil: +1.6%
• Japan (Nikkei 225): –0.6% on the week,  yen weakened –0.4% vs. USD.
• U.S. Dollar Index was soft overall:
  • EM FX basket rose +1.1%
  • Notable moves: AUD +0.8%, EUR +0.3%, JPY –0.4%
• Crude Oil (WTI) rose +6.3%, reaching a 6-week high amid easing U.S.-China trade tensions

Economics

U.S. Economic Overview

• Labor Market:
  • Nonfarm payrolls: +139,000 (May)
  • Unemployment rate: 4.2%, unchanged
  • Hourly earnings: Not explicitly cited but wage pressures are moderating
• Inflation:
  • May CPI (due Wednesday) expected to show early tariff pass-through effects
• ISM Indices:
  • Manufacturing PMI: <50 for third straight month (contraction territory)
  • Services PMI: Contracted for first time in nearly a year
  • ISM export orders: Lowest in 5 years, import orders at GFC lows
• Rate Outlook:
  • Futures imply 2 Fed cuts in 2025, starting in September
  • Treasury yields (as of June 6):
    • 2-yr: 4.04%
    • 10-yr: 4.50%
    • 30-yr: 4.96%
  • 2s/10s spread: +47 bps, marginal steepening

Global Economic Overview

• Eurozone:
  • ECB rate cut: 25 bps to 2.00%
  • May core inflation: 2.3%, headline: 1.9%
  • Wage growth easing: Q1 comp per employee +3.8% YoY
• Japan:
  • Core CPI revised higher for FY2025; BoJ likely to hike next in January
  • Domestic equities pressured by –1.8% weekly decline and rising yields
• China:
  • PMI (official manufacturing): 49.5 (contracting)
  • Non-manufacturing PMI: 50.3; signs of soft service sector demand
  • Yuan rallied +2.5% against USD
• India:
  • RBI rate cut: 50 bps to 5.50%
  • Inflation forecast: Lowered to 3.7%, GDP growth held at 6.5%
• Brazil:
  • CPI forecast (May): 5.38% YoY, above BCB’s upper target band; market pricing 25 bps hike to 15.00%

Week Ahead

Key U.S. & Global Events

• Monday: S.-China Trade Talks

• Wednesday (June 12): U.S. CPI (core expected +0.3% MoM) — pivotal for market direction and Fed trajectory
• Thursday (June 13): U.S. PPI and jobless claims
• Friday (June 14): University of Michigan consumer sentiment (prelim)

Notable Earnings Reports

• Tuesday: Oracle, GitLab
• Wednesday: Broadcom, Five Below
• Thursday: Adobe, DocuSign, RH
• Friday: No major earnings scheduled

Source: https://global-macro-monitor.com/2025/06/07/global-macro-monitor-weekly-update-june-6/