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Weekly Market Update (May 12, 2024)

Updated: May 12


US job market remains soft, increasing the likelihood of the Fed’s rate cut this year. Market is pricing 41bps of cuts by year-end. All eyes are on consumer and producer price index in the coming week as it will provide guidance for the Fed.

BoJ: The comments of the Bank of Japan are more hawkish and it is possible to have an early rate hikes. It is mentioned that if the inflation continues to deviate from their base case scenario, the board members would consider to accelerate the monetary policy normalization. Eurozone: Swedish central bank - Riksbank decided to cut rate this week. It is the second G10 country to cut rate after Switzerland. Bank of England kept rate unchanged this week, while signaling a potential cut in June. Markets raised expectation of cut from European Central Bank in the next meeting.

Utility: Stocks in the utility sector outperformed this week. Markets are speculating that there will be more electricity usage due to the AI development. Utilities tend to be defensive and perform well during economic downturns and dropping rates. However, the current backdrop suggests the opposite. Thus, the strength in this sector was unexpected.





S&P 500















*Data as of market close. 5-day change ending on Friday.



UBS: Equities went up this week, as markets expect the Fed is more likely to cut rates after the higher jobless claims. Further gains in equities will depend on inflation data, Fed comments, Q1 earnings and geopolitical uncertainties. Overall, we are optimistic on equities supported by the positive fundamentals and risk-return outlook.

Barclays: Equity markets performed well due to the optimism for rate cuts. However, we believe the extrapolation is still premature before the inflation prints come in next week.

Fixed Income

Morgan Stanley: Credit spreads are at a historically tight level, mainly driven by the excess cash, locked-in low rates and extended durations. However, the high-rate-for-longer environment will increase interest expenses when debt is rolled over, leading to a drop in interest coverage ratio. Credit spreads will be widened if the rates remain at a higher level for a few more months.

UBS: After the rally in 10Y US treasuries, the response for the bond auction is lukewarm. Government bonds across Europe and Asia also lost ground. Markets are expecting more volatility in the near term.


Morgan Stanley: Labor market is cooling down, as indicated by the Job Openings and Labor Turnover Survey (JOLTS), nonfarm payroll and initial jobless claims. It reinforced the Fed’s easing bias.

J.P. Morgan: Inflation is dropping despite the tight labor market. Dollar is going to stay strong in the near term due to the higher for longer rate environment, it will drop once the Fed starts cutting rates. The dollar-denominated return from overseas assets will be bolstered.



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