Market Observations - Apr 29
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U.S. Friday Market Wrap: Big Week coming!
Stocks jumped, helped by big tech names rallying on strong earnings. The S&P and Nasdaq put in their best week since November. The S&P advanced 1% to close at 5,099, the tech-heavy Nasdaq gained 2.03%, and the Dow rose 153 points or 0.40%. On the week, the S&P gained 2.7% to snap a 3-week losing streak, and the Nasdaq gained 4.2% for its first positive week in five. Seven of eleven S&P sectors closed green. Communications +2.76% led, and utilities -1.09% lagged.
Alphabet traded to new all-time highs, advancing around 10% after posting first-quarter results that beat estimates. Joining the $2t club
Oil prices rose on Friday as investors went long ahead of the weekend from concerns of increased Mid-East tension.
The Japanese Yen continues to get clobbered, nearing 158.
Consumer sentiment also weakened in April, with forward inflation expectations rising to their highest level since November.
The Bank of Japan kept its monetary policy unchanged despite the yen’s recent plunge, causing the currency to fall even further against the U.S. Dollar and other major countries. The central bank did not comment on the yen, even as market participants view its sharp decline as a major macro risk.
Shares of Robinhood, Coinbase, and other crypto-related equities perked up into the weekend, despite BlackRock’s spot Bitcoin ETF seeing its streak of 71 consecutive days of inflows end yesterday.
Do shrinking “working-age” populations threaten economic growth??Economic and population growth have gone hand in hand throughout modern history, but that’s changing now, according to a paper from the Center for Global Development. Countries like Japan, China, Germany, and others have continued to grow even as their working-age population shrinks. More broadly, over a quarter of the world’s population now lives in a country where the working-age population is shrinking rather than growing. China reached that point in 2016, though India and the U.S. have some time, not reaching those levels until 2054 and 2049, respectively.
A week jam-packed with significant market events kicked off with some wild and crazy action in the Japanese Yen during a public holiday.
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The FOMC meeting, the U.S. employment report, and the Eurozone CPI were to be the highlights of the week, but the Japanese yen stole the march to start the week. The dollar soared to almost JPY160.20 before falling sharply to JPY154.55 and then rebounding to nearly JPY156.00. Intervention has not been confirmed, and BOJ data will not be covered until next month. On balance, it appears that most think it was algo-trading in thin markets given the Japanese holiday. The dollar weakened against the other major currencies, and although it is still lower on the day, the downside momentum may have stalled. Emerging market currencies are more mixed. Turkey, South Africa, Hungary, and Mexico are leading, while Russia, Czech, and Indonesia are laggards.
Equities are off to a strong start. The MSCI Asia Pacific Index rallied almost 3% last week, its best performance this year. China’s CSI 300, Taiwan, South Korea, Indonesia, the Philippines, and India’s Sensex rose by more than 1% today.
Europe’s STOXX 600 snapped a 3-week loss to rise by about 1.75% last week, the largest weekly gain since the end of January.
U.S. index futures are trading with a firmer bias today.
Bond markets have rallied. European 10-year benchmark yields are mostly 4-5 bps lower, though U.K. Gilts are underperforming. The 10-year U.S. Treasury yield is off about 4bps to slightly below 4.63%. The two-year yield is 2bps softer, hovering below 4.98%. The U.S. Treasury refunding announcement is Wednesday.
Gold is up for the third consecutive session, but last week, it fell by 2.25%, its first weekly loss in six weeks.
June WTI rallied 2% last week. It reached nearly $84.50 before the weekend and fell slightly through $83 today before stabilizing.
After reporting the April PMIs and Caixin manufacturing PMI on Tuesday, China will move to the sidelines, and the mainland markets will be closed Wednesday through Friday.
The bulk of Japan’s data this week will also be reported tomorrow: employment, retail sales, and industrial production.
There were three by-elections in Japan yesterday, and the LDP lost all three (competed only for one). Australia reports retail sales tomorrow. Sales were off to a strong start in Q1, rising 1.1% in January and edged 0.3% higher in February. The futures market, which had two cuts and almost a 70% chance of a third cut this year in early Feb, is now not quite pricing one cut.
Note that Japanese markets are closed today, Friday, and next Monday.
The Eurozone?publishes?its first estimate of Q1 GDP and April CPI tomorrow. The Eurozone economic activity contracted slightly in the last two quarters of 2023.?
There are two dominant U.S. events this week: the conclusion of the FOMC meeting on Wednesday and the April employment report on Friday.
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