Weekly comment: Payrolls provide welcome boost

Market overview – Richard Carter, Head of Fixed Interest Research

Global equities chalked up a second successive weekly gain, boosted by US data and first quarter earnings reports. The MSCI All Country World Index ended last week up 1.0%, taking year-to-date gains to 6.6%.

US stock benchmarks ended the week up 0.6%, moving into positive territory on Friday after the release of the April nonfarm payrolls. The employment report seemed to find the sweet spot of a cooling labour market without signalling any real weakness as 175k jobs were added for the month and wage growth came in lower than expected. The 175k figure was lower than consensus forecasts and also the lowest reading since November.

The second busiest week of corporate earnings releases saw a positive reaction to Apple's update, helping to improve general sentiment. A US$110bn share repurchase plan — the largest on record — gave investors reason to cheer. This was a similar story to that from Alphabet (Google) the previous week, when they announced their first ever dividend, in that the main positive seemed to be specific to moves intended to sweeten investors, rather than exceptional beats against expected performance. US tech stocks outperformed on the week with indices gaining 1.4% to take the year-to-date advance to 7.9%.

European bourses failed to match their US peers in posting a weekly gain, with the MSCI Europe ex UK falling 0.7%. A mixed bag of corporate earnings and ongoing uncertainty surrounding the outlook for interest rates in the second half of 2024 weighed on sentiment. Mining and energy stocks drove the UK market to new all-time highs, as large caps posted a weekly gain of 0.9%. This takes 2024 gains to 7.8% after a slow start to the year. The pound ended the weekly little changed against the US dollar at 1.25.

Bond yields pull back

The cooling US employment data and declines in leading US economic indicators supported bond markets last week. The US 10-year Treasury yield dropped to a low of 4.4% on Friday morning, the lowest level in almost a month. For the week, the 2-year Treasury yield decreased 18 basis points to 4.82%.

UK bond yields also fell, as the 10-year gilt yield declined 10 basis points on the week to close at 4.22%. The market ended April up 41 basis points and is 69 basis points higher year-to-date, although recent economic developments have encouraged buyers back into the market.

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