HIGHLIGHTS
Equity markets dropped slightly this week. Not a good start of Q2. Fed’s comments and solid economic data may affect the 3-cut plan. Nonfarm payroll came in higher than expected, with robust unemployment data.
Questionable Cuts: Fed officials announced that if inflation is still at a high level, cuts may not be needed in 2024, especially when economic activities remain robust. Markets keep an eye on the coming economic data to adjust expectations, such as the consumer price index (CPI) data next week.
Oil: Oil prices hit the highest point this year, mainly driven by the geopolitical tensions in Iran and Israel. Other than that, the potential disruption of Russia’s oil infrastructure and worse-than-expected pipeline-implied production in the US are supporting the oil price rally.
Metal: Gold prices hit new high this week, with a double-digit gain year-to-date. Historically, gold has been treated as safe haven asset, and the increasing tension in the Middle East has supported its surge. Copper also hit its high for more than a year, as its top import country, China, has reported favorable economic data.
MARKETS
16,248.52 | -0.80% | |
S&P 500 | 5,204.34 | -0.95% |
Dow | 38,904.04 | -2.27% |
10-Year | 4.38% | +18bps |
Brent | 90.93 | +3.94% |
DXY | 104.29 | -0.19% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
UBS: Markets should expect pullbacks after the strong rally. We experienced an impressive start this year in the equity market, S&P500 hit 22 times all-time highs in Q1. Although the recent rally is underpinned by fundamentals, investors should still prepare for corrections.
J.P. Morgan: Equity markets were performing well with a return of 10.6% in Q1, led by the US large-cap stocks. Small-cap stocks increased 5.2%, leaning toward value stocks. Internationally, developed markets (DM) stocks outperform emerging markets (EM) stocks (DM 5.8% vs EM 2.2%). The increase in dollar took a bite out of the gains in EM equities.
Fixed Income
J.P. Morgan: Bonds experienced a downturn in Q1 as the markets pulled down the expectation of rate cuts due to surprisingly robust economic data. The rise in yields weighed on bond prices.
Standard Chartered: Although we see a resistance level at 4.33% in the 10Y treasury yield, it is not impossible that it will break in the short term if oil prices continue to increase - which could push inflation expectations higher.
Economy
Barclays: We believe the global economic growth is broadening due to the manufacturing cycle. Europe and China are picking up the pace, while the economic data in the US including growth and job market are still strong.
UBS: The economic data in the US and the Fed’s rate cuts trajectory are going to swing the markets. Fed officials reiterated that there is no rush to cut the rate until they see more supportive economic data.
KNOWLEDGE TRANSFER
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DISCLOSURE
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