Weekly Financial Market Review and Analysis: June 3 - June 7

**U.S. President Biden Proposes End to Israel-Gaza War**  

President Biden unveiled a proposal to end the Israel-Gaza conflict, urging Hamas to accept the new suggestions. On Friday, May 31, gold prices saw a brief collapse, dropping nearly $40 to a low of $2,320 before closing. The overall PCE for April in the U.S. met expectations, but the core PCE fell short, supporting Fed "hawk" Kashkari's signal for potential rate hikes. As the pricing for a September rate cut weakened, the dollar fell, with the dollar index dropping below 105.00. Trump's conviction on felony charges, Biden's veto of the crypto bill, and Bitcoin's drop to $67,500 also made headlines. Minneapolis Fed President Kashkari stated earlier this week that the Fed should wait for significant progress in inflation before cutting rates, and suggested that if inflation does not rise further, the Fed might even consider rate hikes.

**Eurozone Unemployment Hits Record Low**  

The Eurozone's unemployment rate fell to a historic low of 6.4% in April, reflecting a strong labor market. Germany might also be recovering, with the May Ifo index showing the highest economic expectations since mid-2023. Despite accelerating European economic growth, Germany's recovery continues to lag.

**U.S. Consumer Confidence Rebounds**  

In the U.S., May's consumer confidence index rose stronger than expected, marking the first increase in three months. Similarly, Fed's Kashkari emphasized that no FOMC members have ruled out the possibility of rate hikes. 

**Disappointing Data from China**  

In Asia, China's May PMI data from the National Bureau of Statistics was disappointing, with the official manufacturing PMI falling into contraction territory at 49.5. These figures highlight the fragility of China's economic growth and the ongoing need for stimulus, recognized by the Chinese government. In Japan, Tokyo's May inflation rate (excluding fresh food) rose from 1.6% to 1.9%, but core price pressures remain modest.

**Dollar Index Shows Weak Resistance**  

The weekly chart for the dollar currently resembles a spinning top, not truly reflecting the currency's price movement. The dollar index showed weak resistance to the 105-105.15 area last week, leading to a rapid decline. The index tested the 200-day moving average at the beginning of the week and challenged it again before the weekend (currently at 104.42), marking the sixth test of this critical long-term support line since May. This rebound occurred above the highs before the April breakout, potentially providing a reference for the dollar's bullish structure.

**Gold and Silver Market Trends**  

Gold prices began a strong rebound early last week but accelerated their pullback after the PCE report on Friday. As on Monday and Tuesday, bulls showed fatigue, leading to another decline below the 20-day moving average (2,357 USD) to 2,320 USD. May was a very successful month for silver bulls, with prices rising from near $26 at the beginning of the month to above $32, the highest in a long time. The gold/silver ratio rebounded, and central bank purchases fell, signaling profit-taking in silver prices to $30 before the end of last week.

**OPEC+ Meeting and Oil Prices**  

Investors awaited the OPEC+ meeting on Sunday, which will decide the fate of the country's production organization cuts. The U.S. economic recovery underperformed, leading to increased oil demand and a drop in oil prices to new weekly lows. Brent crude prices fell 0.86% to $81.62, while WTI crude dropped 0.89% to close at $76.89 last week.

**U.S. Stock Market Performance**  

U.S. stock markets showed fatigue last week, with the S&P 500 and Nasdaq indices ending a five-week winning streak, down 0.51% and 1.1%, respectively, closing at 5277.51 and 16735.02. The blue-chip Dow Jones index fell 0.98% to 38686.32, marking its second consecutive weekly decline. However, May was still a winning month, with major benchmark indices recording their first monthly rise in seven months. The Dow Jones rose 2.3%, the S&P 500 climbed 4.8%, and the Nasdaq Composite, the strongest among tech stocks, surged 6.8%.

**Bitcoin's Bearish Technical Indicators**  

Bitcoin's short-term price technical indicators have turned bearish, with key support below $65,000. Last week, Biden vetoed a resolution to replace the SEC's crypto custody accounting standard (SAB 121). The U.S. Congress had passed a resolution proposing to change SAB 121, requiring crypto custodians to record clients' held cryptocurrencies on their balance sheets as custody assets. The crypto industry fears this could prevent banks from safeguarding digital assets.

This Week's Outlook:

**Focus on ECB and U.S. Employment Reports**  

This week, the focus will shift to the European Central Bank and U.S. employment reports. The market widely expects the ECB to cut rates by 25 basis points, mainly because ECB Governing Council members have made similar statements. The expected rate cut is seen as a reversal of the "insurance rate hike" from last September.

**Key U.S. Employment Data**  

In the U.S., the main event this week is the May employment report. I expect nonfarm payrolls to increase by 190,000, slightly higher than April. The average hourly earnings growth rate is likely to stabilize at +0.2%. Also in the U.S., the market will watch Monday and Wednesday's ISM data.

**Asian Market Updates**  

In Asia, wage growth data from Japan and China PMI will be received. Despite last week's disappointing data from China's National Bureau of Statistics, it will be interesting to see if the Caixin PMI, which generally performs better than the official PMI, can maintain its strength. This week, the European Commission may release the results of its investigation into Chinese electric vehicles. Finally, Swiss inflation for May will be closely monitored ahead of the June monetary policy meeting.

Key Economic Data and Events (Beijing Time):

- **Tuesday, June 4:** U.S. Treasury Secretary Yellen attends the Senate Finance Budget Hearing.

- **Wednesday, June 5:** Bank of Canada announces its interest rate decision.

- **Thursday, June 6:** European Central Bank announces its interest rate decision; ECB President Lagarde holds a monetary policy press conference.

- **Friday, June 7:** Speech by the Vice Chairman of the Reserve Bank of Australia; ECB President Lagarde speaks on the economic outlook.

**Economic Data Overview:**

- **Monday, June 3:** Eurozone May SPGI Manufacturing PMI final; UK May SPGI Manufacturing PMI final; U.S. May SPGI Manufacturing PMI final; U.S. May ISM Manufacturing PMI.

- **Tuesday, June 4:** Australia's ANZ Consumer Confidence Index for the week ending June 2; Australia Q1 Current Account (in AUD billion); U.S. April Durable Goods Orders (revised %); U.S. April Factory Orders (m/m %); U.S. April JOLTs Job Openings (in thousands).

- **Wednesday, June 5:** Australia May AIG Performance of Manufacturing Index; Australia Q1 seasonally adjusted GDP (q/q %); UK May SPGI Services PMI final; U.S. May ADP Employment Change (in thousands); U.S. May ISM Non-Manufacturing PMI; U.S. EIA Crude Oil Inventory Change (in thousands) for the week ending May 31.

- **Thursday, June 6:** Australia April Investment Housing Loans (m/m %); Eurozone June ECB Main Refinancing Rate (%); U.S. April Trade Balance (in billion USD); U.S. Initial Jobless Claims (in thousands) for the week ending June 1; U.S. Initial Jobless Claims (in thousands) for the week ending May 25; U.S. EIA Crude Oil Inventory Change (in thousands) for the week ending May 24.

- **Friday, June 7:** Eurozone Q1 seasonally adjusted GDP final (q/q %); U.S. May Nonfarm Payroll Change (in thousands); U.S. May Unemployment Rate (%); U.S. May Average Hourly Earnings (y/y %); U.S. April Wholesale Inventories final (m/m %).