View Static Version

Markets in a minute 15th April 2024

IT'S NOT EASY

Last week, higher US inflation figures led equity and bond markets lower as fewer rate cuts were expected in 2024. Markets also pushed out the start of the cuts as sticky inflation was viewed as a problem. Finally, over the weekend, tensions in the Middle-East escalated as Iran launched an aerial bombardment against Israel.

This week, investors will be closely focused on developments between Israel & Iran which may overshadow some key activity data including US retail sales and industrial production, as well as Eurozone industrial production and Germany's ZEW business survey.

Last week, equity markets finished weaker in both the US and Europe as data suggested that inflation is not yet ready to capitulate.

US inflation data for March came in higher than the market expected, leading to falls in US equity markets on Wednesday. Investors reacted to the data by pushing out their expectations for the start of any cutting cycle to be delayed from the first half of 2024 to the second half.

On Thursday, the ECB kept its policy rates unchanged but there were some on the rate setting committee that wanted to cut the policy rate. ECB President Lagarde was seen as signalling that a rate reduction could come in June and this weighed on European bank stocks as lower interest rates could reduce margins via reduced lending interest rates.

Over the weekend, tensions in the Middle-East escalated with Iran launching a significant barrage against Israel in retaliation for an earlier attack on an Iranian consulate annex in Damascus. Markets thus far appear to have shrugged off any immediate concerns. The Iranian regime has stated that their operations are now concluded whilst the US has advised that it will not support any counter attack. Israel has indicated that it will respond at a future date.

US treasuries finished weaker last week as end-2024 interest rate expectations moved higher. This was driven by both higher US inflation data but also minutes from the Fed's March meeting that suggested policymakers were concerned inflation was not sustainably coming down to the 2% target. In contrast, German 10yr yields fell on more dovish guidance from the ECB.

Expectations for rates was reflected in markets with yields for 10yr US Treasuries up and 10yr Bunds down over the week (Bond Yields Rise as Bond Prices Fall).

This week, investors will be closely focused on potential developments in the Middle-East along with some key activity data including US retail sales and industrial production, Eurozone industrial production and Germany's ZEW business survey.

Mon 15th

US - Retail sales

Eurozone - Industrial production

Tue 16th

US - Industrial production

Germany - ZEW business survey

Wed 17th

US - Fed Beige book

Thu 18th

US - Initial jobless claims, leading indicators

Fri 19th

Germany - Producer price inflation

This is intended as a general review of investment market conditions. It does not constitute investment advice and has not been prepared based on the financial needs or objectives of any particular person.

NextPrevious