Markets in a minute 27th May 2024

TALKING THE TALK

Last week, central bank speakers seeking to calm rate cutting expectations dampened sentiment towards equities and bonds. Some stronger economic data also supported the case for fewer rate cuts.

Meanwhile, another blockbuster earnings announcement from Nvidia lifted sentiment in the equity market. For more on the latest earnings season – what it is, why it matters, key takeaways and more - please see the link below.

This week, focus is set to be on April inflation figures from the Eurozone and the US on Friday. These data points could impact the amount of rate cuts the market expects from the ECB and the Fed in 2024.

Last week, the S&P 500 briefly rose to yet another new historical high after strong earnings from Nvidia. However, this was countered by lower expectations around potential central bank rate cuts. The S&P 500 finished the week flat, supported by a rally in tech shares, while the Euro Stoxx 600 fell by 0.5%.

Nvidia's earnings announcement for the latest quarter once again exceeded market expectations - revenue rose by 262% y/y amid strong demand for its chips and graphics processing units that are used to power AI applications. This helped to briefly push the S&P 500 up to new historical high.

However, stronger than expected global PMIs - a measure of business conditions and sentiment - for May suggested that numerous rate cuts might not be appropriate in 2024 and this weighed on equities later in the week. The US composite PMI rose to a 25-month high amid strength in both manufacturing and services sectors. The equivalent for the Eurozone increased to a 12-month high, aided by strong new orders.

Central bank speakers in both the US and the Eurozone last week suggested that multiple rate cuts may not be forthcoming this year given continued economic strength and inflation above the Banks' 2% targets. Minutes from the Fed's last meeting also showed that "various" members of the rate setting committee were willing to increase interest rates if upside inflation risks rose sufficiently.

This backdrop pushed bond yields higher (bond yields rise as bond prices fall) for both 10-year US Treasuries and equivalent German bunds to 4.48% and 2.61% (a one-month high), respectively.

This week, focus is set to be on April inflation figures from the Eurozone and the US on Friday. These data points could impact the amount of rate cuts the market expects from the ECB and the Fed in 2024.

Mon 27th

Germany - IFO business survey

Tue 28th

US - Consumer confidence

Wed 29th

US - Fed Beige book

Germany - Consumer confidence

Thu 30th

US - Initial jobless claims

Eurozone - Unemployment rate

Fri 31st

US - PCE inflation

Eurozone - Consumer 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.