HIGHLIGHTS
Nonfarm payroll came in lower than expected (143k actual vs 173k expected), with unemployment rate dropping slightly from 4.1% to 4.0%. Reported earnings are mixed.
Tariff: Markets rebounded after the delay in tariffs on Mexico and Canada. Tariffs on China are lower than expected. Investors interpreted tariffs as negotiation tactic. Volatility index (VIX) dropped from 20.42 to 16.47 this week.
UK: Bank of England cut rate by 25bps this week. It is surprising that two members were advocating 50bps cut. As there are higher risks of growth downgrade and an increase in inflation, markets are expecting further easing.
Mexico: The Banxico, central bank of Mexico, cut its interest rates by 50bps, with a dovish forward guidance. The risks in economic activity are higher due to the uncertainty in global and US trade policy.
MARKETS
19,523.40 | -0.53% | |
S&P 500 | 6,025.99 | -0.24% |
Dow | 44,303.40 | -0.54% |
10-Year | 4.49% | -8bps |
Brent | 74.70 | -2.23% |
DXY | 108.10 | -0.37% |
*Data as of market close. 5-day change ending on Friday.
VIEW FROM THE STREET
Equity
Goldman Sachs: Amazon’s earnings reported better than expected, but the stock prices dropped due to the disappointing forward guidance. Similarly, Alphabet had an increase in advertisement revenue, but stock prices dropped due to the slower growth in cloud businesses.
Standard Chartered: The Deepseek implication for global equities is that more companies will emphasize the efficiency of AI-related investments. In near-term, volatility is likely to stay at higher level.
Fixed Income
Morgan Stanley: Fed has paused its rate cut campaign and emphasized the data-driven approach while not mentioning the end to quantitative tightening. It implies that valuation multiples may have hit a ceiling as they are benefiting from the low-rates environment. We believe normalization of rate has started and investors should focus on earnings instead.
UBS: We expect 10Y treasury yield to drop to 4%, driven by the cool down in inflation and further rate cut, supporting capital appreciation.
Economy
UBS: Last month, policymakers signaled a strong labor market, mentioning that unemployment is at a stabilized low level. Looking at today’s data, the job creation is lower, though still solid.
Barclays: Trump’s attention is expanding to EU and geopolitical deals, and the trade war with China has started. We still expect Trump wants a deal with China, although the circumstances have reduced the likelihood.
KNOWLEDGE TRANSFER
GLP-1
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DISCLOSURE
This newsletter is meant for informational purposes only and is not investment advice. Always consult a licensed investment professional before making important investment decisions. Advertising and sponsorship do not influence editorial content or decisions. Market Hedwig is not responsible for the promises made or the quality or reliability of the products or services offered in any advertisement.
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