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Week in Review: 29 May-2 June 2023

Summary and Comments


The US debt ceiling talks are over and the default disgrace has been avoided with the passing of the Fiscal Responsibility Act (FRA) by the House and the Senate. The act suspends the debt ceiling until Jan. 1, 2025, in exchange for certain spending cuts, restraints and other provisions. The act was a compromise that was unacceptable to far-right and far-left members in both houses of Congress. While the bill was named the FRA, it only makes a modest dent in the large and growing projected fiscal imbalance and does not stabilize or reduce projected debt/GDP levels. Therefore, the FRA does not come close to assuring fiscal sustainability, which is essential for the US long-term future.

On Wednesday, US's job openings came higher than expected, while the Non Farm Payrolls indicated a higher than expected growth in the number of jobs.

ISM Manufacturing PMI in the United States fell to 46.9 in May of 2023 from 47.1 in April, the seventh consecutive month of contraction in the manufacturing sector. The ISM Services PMI also fell (to 50.3 in May of 2023), pointing to a slowing economy.

For the week, big cap tech stocks ended in the green, with the the NASDAQ up 1.7 %. The S&P500 went up 1.8 %, and the RUSSEL 2000 rised considerably (3.3 %). Gold was flat and silver went up 1.3 %. The barrel of WTI sinked 1.3 % for the week. Natural gas dropped 8.6 %.

The relative strength of the US dollar varied little (-0.2 %). The US 10-year yield dropped 3.6 %. The US bond yield is peaking at 6.3 % in 6 months from now, and the yield curve remains inverted.

Sources:

https://tradingeconomics.com/

https://thehill.com/opinion/finance/4032300-with-the-debt-ceiling-resolved-its-time-for-a-fiscal-responsibility-commission/

 

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