US manufacturing sentiment has improved and labor market resilience has exceeded expectations, while China's economic fundamentals remain resilient

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Hello, fellow investor friends. What important changes occurred in the market last week? Let's take a look together:

Last week, the U.S. macro landscape was characterized by notable pockets of economic resilience, renewed inflationary pressures, and a policy outlook tilting toward tightening—highlighting pronounced structural divergence across sectors. On the production side, the ISM Manufacturing PMI rose to 54.0 in May, hitting its highest level since 2022 and marking the fifth consecutive month of expansion,boosted by AI-related investment, improved trade conditions, and precautionary inventory building by firms, which jointly lifted new orders and production sentiment. However, geopolitical tensions in the Middle East pushed up energy and raw material prices,keeping cost pressures on manufacturers elevated, with price indices remaining near multi-year highs. The services sector also continued to expand, with the ISM Services PMI edging slightly higher in May, though the employment index remained in contraction territory as businesses broadly froze hiring and controlled staffing levels. Labor market resilience exceeded expectations: May ADP private-sector job growth hit a more-than-one-year high, driven notably by small businesses and trade/transportation sectors, while wage growth stayed stable—further reinforcing market expectations for additional rate hikes.The latest Fed Beige Book confirmed broad-based inflationary pressures, with multiple districts reporting sharp increases in energy, transportation, and raw material costs, which continue to be passed through to consumers. Household purchasing power is under strain, and consumption patterns are increasingly bifurcating,with lower- and middle-income households cutting back on discretionary spending while higher-income consumers remain relatively resilient—evidence of a clear K-shaped recovery. Overall, the U.S. economy continues to expand moderately, but heightened uncertainty persists due to stubbornly high inflation, waning business investment appetite, downward revisions to Q1 GDP growth, and long-standing structural vulnerabilities from high debt and fiscal deficits.The Federal Reserve’s policy decision at its June FOMC meeting has become the central focus for markets, with the probability of another rate hike continuing to rise.

Last week, China’s macro landscape exhibited a structurally divergent pattern—manufacturing weakened while services warmed—yet the overall economy maintained mild expansion. The official Manufacturing PMI dipped to exactly 50.0 in May, signaling a cooling in sentiment, primarily dragged down by deteriorating conditions among small and medium-sized enterprises.Large enterprises continued to expand, but manufacturing demand softened marginally, employment sentiment slowed, and raw material inventories contracted, placing pressure on both supply and demand sides.Non-manufacturing activity stood out relatively, with the business activity index edging up slightly. The services sector saw improved sentiment, and industries such as railways, telecommunications, and insurance maintained high levels of activity, offsetting the construction sector's weak performance and driving the composite PMI output index higher. Overall, business expectations remained positive.Logistics demand in manufacturing and livelihood-related sectors expanded steadily, but the warehousing index fell into contraction territory, impacted by the off-season for commodities, slower inventory restocking in manufacturing, and weather-related disruptions.Warehousing turnover efficiency declined and inventories accumulated somewhat, while cost pressures from fuel and labor continued to mount across the sector. Overall, the pace of China's economic recovery has slowed, with structural weaknesses becoming more pronounced—domestic demand in manufacturing remains subdued and small and medium-sized enterprises face significant operational pressures, though emerging growth sectors continue to provide solid support.Services and logistics showed marginal improvement, underscoring the underlying resilience of the economy.

In bond market performance, global bond markets overall pulled back over the past week, with the Global Aggregate Index down 0.89%The US Aggregate Index fell 0.54%, US investment-grade corporate bonds declined 0.59%, and US high-yield corporate bonds dropped 0.42%. The Emerging Markets USD-denominated Bond Aggregate Index decreased by 0.25%, while the China USD Credit Bond Index fell 0.26%.On the rates front, U.S. Treasury yields flattened in a bearish move.The 2-year U.S. Treasury yield rose 14 bps to 4.15%, and the 10-year U.S. Treasury yield climbed 9 bps to 4.53%.

$E Fund (HK) Select Bond Fund (HK0000672128.MF)$ The net asset value of Class A Accumulation USD shares is 12.77*. Recent overall trends in the bond market indicate...We will continue to deploy high-quality credit-rated assets amid low spreads, striving to provide more stable returns than the market。

Key economic data releases to watch this week:

China will release May social financing and import/export data on Tuesday;

China will release May CPI and PPI data on Wednesday; the U.S. will also release May CPI data on the same day;

The U.S. will release May PPI data on Thursday.

*Data sourced from E Fund Hong Kong's official website as of June 8, 2026.

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