Market and Macro Overview for the Week (19-26 Apr 2024)

Macro Trends

It was quite a whirlwind for the financial markets again. With the backdrop of rising inflation in the United States and mixed quarterly results from across the Atlantic, uncertainty was in the air. Despite the turbulence, the market managed to stay resilient, largely due to the solid performance of the tech giants. While it's expected that interest rates will hold steady this week, all eyes are on Jerome Powell's upcoming remarks for any hints about the market's future direction.

Stock Markets

Last week marked the peak of the earnings season, with approximately one-third of S&P 500 companies releasing their earnings reports, accounting for 40% of the index's total market capitalization. The results thus far have been quite positive, with approximately 80% of companies surpassing earnings expectations by an impressive 10%. All eyes were on the "Magnificent Seven," a group of mega-cap tech companies, given their significant contribution to index earnings. Among the four M7 reporting companies last week, three saw their stock prices rise (Tesla, Alphabet, Microsoft). Alphabet particularly stood out by exceeding estimates and announcing its first-ever dividend. However, Meta's shares dipped following its earnings report, as the company provided a revenue forecast below expectations. In Europe, the MSCI Europe ex UK index rebounded strongly, adding 1.7% for the week (up 7.0% YTD), breaking a three-week losing streak. Improved sentiment was driven by a de-escalation of tensions in the Middle East and positive corporate earnings results. Major European stock indexes saw gains, with Germany's DAX Index rising by 2.4%, France's CAC 40 Index increasing by 0.8% and in the UK, the FTSE 100 Index rallied, posting gains of 3.1% reaching fresh all-time highs. Japan's stock markets also saw gains fuelled by historic weakness in the yen with the TOPIX Index climbing by 2.3%.

Top of Form

Fixed Income and STIRs

In the United States, the yield on the benchmark 10-year Treasury note saw a slight decrease following the release of Friday's PCE data but remained near its highest level in almost six months. For the week, the 10-year Treasury yield increased by 5 basis points to 4.67% from 4.62% (up 79bp YTD). Meanwhile, the 2-year Treasury yield rose by 1 basis point to 5.00% from 4.99% (up 75bp YTD). The investment-grade corporate bond market experienced a relatively quiet week with limited issuance, most of which was oversubscribed. In Europe, government bond yields reached their highest levels this year. Strong economic data from the United States raised expectations that the Federal Reserve would maintain higher interest rates for an extended period, potentially prompting other major central banks to follow suit. Over the week, the 10-year German bund yield increased by 7 basis points, closing at 2.57% from 2.50% (up 55bp YTD) after briefly exceeding 2.6%. In the United Kingdom, the 10-year gilt yield rose by 9 basis points, ending the week at 4.32% from 4.23% (up 79bp YTD). In Japan, the yield on the 10-year Japanese government bond rose to 0.89% from the prior week's 0.85%.

FOREX Markets

The US dollar is closed the week with a slight weakening against most currencies, despite another round of hotter-than-expected US inflation data. However, the primary focus in currency markets last week has been on the continued decline of the Japanese yen, which reached a new low for the year. Policymakers at both the Bank of Japan (BoJ) and the Ministry of Finance (MoF) refrained from intervening to support the currency with concrete action, contributing to its downward trajectory. With US economic data offering little hope of a near-term reversal in interest rate expectations, the pressure on the yen, as well as other currencies in Asia, may intensify further.

Cryptocurrency

The market has remained choppy over the past seven days, struggling to establish a clear direction. Total capitalization hovers around $2.5 trillion, roughly unchanged from the previous week. However, substantial volatility has led to liquidations among leveraged traders. Bitcoin's performance has been particularly notable. Despite efforts from bulls to push its price above $66K and challenge critical resistance at $68K, these attempts were unsuccessful. As a result, bears gained confidence and drove the price back toward the lower end of the range, with Bitcoin currently trading around $64K. Interestingly, while Bitcoin stagnated, many altcoins saw gains during this period. Ethereum (ETH) rose by 2.1%, Ripple (XRP) gained over 4%, Shiba (SHIB) surged by 9.2%, Tron (TRX) by 8.8%, and Binance Coin (BNB) emerged as the top-performing altcoin with an almost 8% increase over the past seven days.

Commodities & Energy

Oil saw a modest weekly gain, rebounding after two weeks of decline as operators reacted to geopolitical tensions. Recent events between Iran and Israel seem to have eased, shifting focus to other catalysts, notably the Federal Reserve's monetary policy. In terms of prices, Brent crude is trading higher around $88.00, while WTI stands at approximately $84. Copper continues its upward trend in London, trading around $4.60, driven partly by a weaker dollar and partly by a less optimistic supply outlook. Chile, a major copper producer, revised its production growth forecast downward to 5.51 million tonnes from 5.63 million tonnes, contributing to the bullish sentiment. In the mining sector, Anglo American rejected a takeover bid from BHP Group, signalling a failed attempt at industry consolidation. Meanwhile, gold took a breather, slipping to $2,340 per ounce in the precious metals market.

What to watch next week

Mon –? Spanish Flash CPI (Apr), German Prelim CPI (Apr), EZ Sentiment Survey (Apr); Japan Market Holiday (Showa Day) Tue - ?FOMC Meeting Commences (Announcement on 1st May), Japanese Retail Sales/Industrial Output (Mar), Chinese NBS PMIs (Apr), Chinese Caixin Manufacturing Final PMI (Apr), French Flash CPI (Apr), German Flash GDP (Q1), EZ Flash CPI (Apr)/Flash GDP (Q1), US Employment Wages (Q1)/CaseShiller (Feb), US Chicago PMI (Apr), New Zealand Jobs (Q1) Wed - FOMC Announcement, Eurozone, Chinese Market Holiday (Labor Day), South Korean Exports (Apr), UK/US Manufacturing Final PMI (Apr), US ADP National Employment (Apr), US ISM Manufacturing PMI (Apr), US JOLTS Job Openings (Mar) Thu - ?Chinese Market Holiday (Labor Day), South Korean CPI (Apr), Swiss CPI (Apr), EZ Manufacturing Final PMI (Apr), Hong Kong GDP (Q1), US Durable Goods (Apr) Fri - Chinese Market Holiday (Labor Day), Japan Market Holiday (Constitution Memorial Day), EZ/UK/US Services and Composite Final PMIs (Apr), US Jobs Report (Apr), US ISM Services PMI (Apr)

MARKETS WEEKLY PRICING COMPARISONS