Macro Trends
The week concluded on a positive note after a wait filled with anticipation. Market participants were eagerly awaiting Jerome Powell's speech, but it left much to be desired. Powell primarily focused on inflation and the job market, which remains resilient enough to deter any immediate rate cuts. Fortunately, the latest US job creation data fell below expectations, with 175k jobs added compared to the forecasted 240k. Additionally, wage growth was less than anticipated, at an annual rate of +3.9% instead of the estimated +4.0%. These factors contributed to a rise in indices and a decline in bond yields. The US 10-year bond yield is now nearing a critical support zone around 4.42/33%. Several indicators released during the week in the United States suggest that economic growth may be facing some challenges. In Europe, the focus was on the first estimate of April inflation, which, while slightly stronger than expected, did not alter the outlook for a potential ECB rate cut in June.
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Stock Markets
In the US, the S&P 500 Index concluded the week with a 0.6% gain after experiencing volatility driven by a flurry of economic and earnings data. Growth stocks outpaced value shares, while small-caps outshone large-caps. The Nasdaq Composite Index, heavy on technology, advanced by 1.0% despite a 4.4% decline in April. The week saw the second-busiest release of first-quarter earnings reports, with Apple's positive earnings announcement on Thursday lifting overall market sentiment. Apple surpassed revenue expectations and pleased investors by announcing a record-breaking USD 110 billion share buyback plan. Tesla also made waves, surging over 15% after Elon Musk's surprise appearance in China and the government's tentative approval of its self-driving technology. In Europe, investors turned cautious amid mixed corporate earnings and uncertainty surrounding post-June interest rates. Major stock indexes retreated, with Germany’s DAX Index down by 0.9%, France’s CAC 40 Index losing 1.6%, and Italy’s FTSE MIB Index weakening by 1.8% (1.4% decline in April, 13.1% year-to-date). Conversely, the UK's FTSE 100 Index gained 0.9%, driven by strength in mining and energy stocks, while the FTSE 250 Index added 1.8%. Perceptions of Japanese intervention in foreign exchange markets to support the yen buoyed Japanese stocks, with the Nikkei rising by 0.8%, bringing the year-to-date increase to 14.3%. Changes in the Bank of Japan's accounts suggested such interventions occurred, although authorities refrained from confirming action to halt the yen's historic decline.
Fixed Income and STIRs
The evidence of a cooling jobs market contributed to a decline in the yield on the benchmark 10-year US Treasury note, reaching an intraday low of approximately 4.45% on Friday morning, marking its lowest level in nearly a month. Throughout the week, the 10-year Treasury yield dropped by 16 basis points to 4.51% from 4.67%, while the 2-year Treasury yield decreased by 18 basis points to 4.82% from 5.00%. European government bond yields followed suit, generally decreasing as policymakers downplayed concerns about potential further interest rate hikes by major central banks. The 10-year German bund yield fell by 8 basis points, ending the week at 2.49% from 2.57%. In the UK, the 10-year gilt yield declined by 10 basis points, closing the week at 4.22% from 4.32%. Meanwhile, in Japan, despite some intra-week volatility, the yield on the 10-year Japanese government bond remained broadly unchanged, hovering near a six-month high at the 0.9% level. This occurred against the backdrop of strong US wage data, raising concerns that the Fed may maintain higher interest rates for an extended period. In March, the Bank of Japan lifted interest rates from negative territory for the first time in seven years, leading many to anticipate two additional rate hikes within approximately a one-year time frame.
FOREX Markets
The USD wrapped up the previous week with losses, driven by a series of factors that reshaped market sentiments and expectations. A pivotal moment occurred during Fed Chair Jerome Powell's less hawkish-than-feared statements at the FOMC press conference, alongside disappointing US employment data. These events prompted a shift in market expectations towards anticipating two Fed rate cuts by the end of the year. This adjustment in interest rate outlooks triggered a rally in US stocks and a notable decrease in Treasury yields, further weighing down on the Dollar. Adding to the USD's decline was Japan's reported intervention in currency markets. Significant buying of the Yen, particularly after it breached a significant psychological level against the USD, propelled the Yen to the forefront for the week. This intervention seemed strategically timed amidst key market transitions, underscoring Japan's willingness to intervene in currency markets at any time.
Cryptocurrency
From Monday (April 29) to Saturday (May 4), BTC experienced a marginal increase of 0.01% to reach $63,173. However, it's noteworthy that BTC dipped to a low of $56,551 on May 1 before recovering to the $63,000 level. The market's response to the FOMC press conference and the US Jobs Report significantly impacted US BTC-spot ETF market trends and buyer demand for BTC, resulting in total net outflows of $433 million. Importantly, US BTC-spot ETFs saw total net outflows for the fourth consecutive week, reflecting a persistently weak demand environment that overshadowed the effects of the Bitcoin Halving on the supply-demand dynamic. Market sentiment regarding the Fed's rate trajectory influenced buyer appetite for Bitcoin-spot ETFs, with the FOMC press conference causing BTC to drop to its May 1 low, while the US Jobs Report reignited buyer demand for spot ETFs.
Commodities & Energy
Oil prices retreated this week, experiencing a notable decline. The geopolitical risk associated with friction eased with prospects of a ceasefire in Gaza. Moreover, the latest US weekly inventory data exerted pressure on prices as stocks surged by 7.3 million barrels, contrary to economists' expectations of a 2.3-million-barrel contraction. North Sea Brent is hovering around $84 per barrel, while US WTI stands at $79 per barrel. Given this price weakness, it's likely that OPEC+ will consider extending its production quotas beyond June. Copper is pausing after reaching the 4.6900 mark in London. Similar to oil, the price of copper and other industrial metals is influenced by the Federal Reserve's monetary policy. Prolonged higher rates could potentially dampen global demand. Gold, on the other hand, has declined for the second consecutive week, now at USD 2300. Despite short-term weakness, central banks are actively accumulating the precious metal. The World Gold Council's latest report indicates that central banks added 290 tonnes of gold to their reserves in the first quarter.
What to watch next week
Tue - Japan PMI, Australia Retail Trade, German Industrial Orders, Trade Balance, EZ & UK Construction PMI, RCM/TIPP Economic Optimism, RBA Policy Announcement, Fed’s Kashkari Wed - German Industrial Orders, Italian Retail Sales, US Wholesale Sales, Riksbank Policy Announcement; BoC FSR, ECB’s Wunsch, de Cos; Fed’s Cook Thu - Holiday:EZ Ascension Day (c, BoJ SOO; BoE Policy Announcement; BoE DMP; Banxico Policy Announcement, BoE’s Bailey, Pill; ECB’s Cipollone; ECB’s de Guindos Fri - Japanese Household Spending, UK GDP, Services, Manufacturing Output, Italian Industrial Output, Canadian Jobs Data, BoC SLOOS, Chinese Money Supply, ECB’s Cipollone, Elderson; BoE’s Pill; Fed’s Goolsbee Sat - Chinese CPI
MARKETS WEEKLY PRICING COMPARISON
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