Markets ended last Friday in the green after the US April CPE (core personal expenditure) deflator rose by 2.7%, in line with expectations and lending support to the argument inflation is heading towards the Federal Reserve’s official 2% target even if there are a few bumps in the road.

This week started on a bright note with the UK Manufacturing PMI (purchasing managers’ index) showing a return to growth in May as output expanded at the quickest pace in over two years thanks to a jump in new orders.

‘May saw a solid revival of activity in UK manufacturing with levels of production and new business both rising at the quickest rates since early-2022,’ commented Rob Dobson of S&P Global Market Intelligence, which compiles the index.

As Shares went to press, the ECB (European Central Bank) was expected to begin cutting interest rates having raised them 10 times between July 2022 and October 2023 and held them steady in the intervening period.

However, with Eurozone inflation topping forecasts last month the ECB seems unlikely to cut rates rapidly so investors will pay close attention to comments regarding the outlook.

The end of this week will be dominated by US May non-farm payroll figures, with the market expecting a slight uptick to 185,000 new jobs added from 175,000 in April, and as ever the report has the potential to drive markets sharply one way or the other.

Next week is fairly light in terms of data but the market’s whole focus will be on Wednesday’s US core consumer prices and the Fed interest rate meeting.

While bets on US rate cuts this year have been drastically pared back, investors will still hang on chair Jerome Powell’s comments for an indication of when to expect the easing cycle to begin.

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