Economic Indicators & Central Banks:
- Stocks, Treasury yields and US Dollar stay firmed.
- Fed Chair Powell added to the recent sell off. His slightly more hawkish tone further priced out chances for any imminent action and the timing of a cut was pushed out further. He suggested if higher inflation does persist, the Fed will hold rates steady “for as long as needed.”
- Implied Fed Fund: There remains no real chance for a move on May 1 and at their intraday highs the June implied funds rate future showed only 5 bps, while July reflected only 10 bps. And a full 25 bps was not priced in until November, with 38 bps in cuts seen for 2024.
- US & EU Economies Diverging: Lagarde says ECB is moving toward rate cuts – if there are no major shocks.
- UK March CPI inflation falls less than expected. Output price inflation has started to nudge higher, despite another decline in input prices. Together with yesterday’s higher than expected wage numbers, the data will add to the arguments of the hawks at the BoE, which remain very reluctant to contemplate rate cuts.
- Canada CPI rose 0.6% in March, double the 0.3% February increase BUT core eased. The doors are still open for a possible cut at the next BoC meeting on June 5.
- IMF revised up its global growth forecast for 2024 with inflation easing, in its new World Economic Outlook. This is consistent with a global soft landing, according to the report.
Financial Markets Performance:
- USDJPY also inched up to 154.67 on expectations the BoJ will remain accommodative and as the market challenges a perceived 155 red line for MoF intervention.
- USOIL prices slipped -0.15% to $84.20 per barrel.
- Gold rose 0.24% to $2389.11 per ounce, a new record closing high as geopolitical risks overshadowed the impacts of rising rates and the stronger dollar.
Market Trends:
- Wall Street waffled either side of unchanged on the day amid dimming rate cut potential, rising yields, and earnings. The major indexes closed mixed with the Dow up 0.17%, while the S&P500 and NASDAQ lost -0.21% and -0.12%, respectively.
- Asian stock markets mostly corrected again, with Japanese bourses underperforming and the Nikkei down -1.3%. Mainland China bourses were a notable exception and the CSI 300 rallied 1.4%, but the MSCI Asia Pacific index came close to erasing the gains for this year.
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Andria Pichidi
Market Analyst
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