Julex Market Weekly 05-05-2013 | US Stocks Rose to Record Highs

Top Stories Last Week

• US Stocks Rose to Record Highs

U.S. stocks rose last week to end at record highs following solid corporate earnings and
better-than-expected job gains in April. S&P index was up by 2.0%, and MSCI EAFE
index rallied 2.0%. The MSCI Emerging Market Index rose 2.9%. Gold price continued
to increase by 0.8%. The SPGC commodity index climbed 1.2% as oil prices rose again.
The bond markets were sold off after the strong job report. Barclays US Treasury index
declined by 0.3% while US high yield bonds was up 1.1%.

• The U.S. Added 165K Jobs and Unemployment Rate Dropped to 7.5% in April

The U.S. added a net 165K jobs in April and the hiring was stronger in March and February than initially reported. The increase in jobs exceeded the 135K forecast of economists. The acceleration in hiring also nudged the unemployment rate down to 7.5% from 7.6%. That’s the lowest level since December 2008. The unemployment rate fell even though the participation rate increased, which is a good sign. Moreover, the number of new jobs created in March was revised up to 138K from 88K, while February’s figure was revised up to 332K from 268K.

• Fed Kept Interest Rates on Hold and QE

The U.S. Federal Reserve kept interest rates on hold, at record lows, to try to keep the U.S. recovery on track. It also reiterated its pledge to purchase $85 billion a month in Treasury bonds and mortgage-backed securities to hold down long-term interest rates and pump cash into the economy.

• European Central Bank Cut Interest Rate by 25 Basis Points

The European Central Bank has slashed its benchmark interest rate by 25 basis points to an all-time low of 0.5%. The rate cut was expected. The ECB has come under significant pressure to cut rates, the first time it has done so in nearly a year, as the economic recovery across the euro zone has struggled or stalled. ECB President Mario Draghi also left open the possibility of cutting rates further.

• US Manufacturing Sector Slowed but Still Expanded

Economic activity in the manufacturing sector expanded in April for the fifth consecutive month. The Institute for Supply Management (ISM) index was 50.7 in April, down 0.6 percentage points from 51.3 in March. At 50.7, the indicator suggests that manufacturing activity is barely growing. ISM’s New Orders Index registered 52.3 in April, an increase of 0.9 point when compared to the March reading of 51.4. This represents growth in new orders for the fourth consecutive month. ISM’s Production Index registered 53 in April, which is an increase of 1.3 points when compared to the 52.2 reported in March.

Top Stories to Watch This Week

• More Earning Reports

Walt Disney and Whole Foods are scheduled to report quarterly earnings.

• Chinese Economy Is on the Spotlight

China will report trade balance and consumer price index.

• BOE and RBA Monetary Policy Meetings

Bank of England and Reserve Bank of Australia will meet to determine monetary policy.