Markets in a minute 13th May 2024

Last week, US equity markets were again supported by better-than-expected earnings, but also the potential for rate cuts later in the year after the Fed guided for this following its policy meeting. The case for lower interest rates was also supported by softer April employment data.

The S&P 500 finished the week just over 1.9% higher, while the Euro Stoxx 600 finished up 3.4%, notching its' sixth straight session of gains buoyed by lower volatility, and an expected rate cut in June.

In the US, the Senior Loan Officer Survey (SLOOS) showed that credit conditions continued to worsen in Q1. That is, lending standards became more stringent but loan demand also fell, suggesting that financial conditions were restrictive for growth. This supports the case for lowering interest rates, which could support economic activity.

Eurozone retail sales recovered in March, aided by a rebound in Germany. This further supported the idea that growth momentum in the region has picked up in recent months. However, data from Germany also showed that industrial activity in the country remains lacklustre.

ECB speakers continued to guide for a rate cut in June while some Fed speakers expected rates to be reduced later in 2024. As a result, bond yields fell (bond yields fall as bond prices rise) for both 10-year US Treasuries and equivalent German bunds to the lowest levels in nearly a month.

This week, economic data ranging from US retail sales to German business and April China activity are likely to be in focus to gauge the strength of the global economy in Q2. April US consumer prices (Wednesday) are set to be a key point of interest in relation to future Fed interest rate policy given sticky inflation in Q1.