MARKET SUMMARY
GLOBAL EQUITIES: Global equities were volatile last week as investors
digested central bank meetings, corporate earnings reports, and jobs
data. US equities tumbled as investors worried about the Fed’s ability to
tame surging inflation, with the S&P 500 ending -0.18% lower. In Europe,
the FTSE 100 and STOXX 600 fell -2.07% and -4.33%, respectively, as
the BoE warned of recession risk.
COMMODITIES: Oil prices rose on the back of supply concerns, with the
EU proposing a ban on Russian oil imports, OPEC+ indicating it would
stick to modest oil outputs, and the US announcing its plans to refill its
strategic petroleum reserves. Brent and WTI rose to $112.39 and
$109.77 per barrel, respectively. Meanwhile, gold prices fell -1.48%
amidst equity market volatility.
FIXED INCOME: US Treasury yields whipsawed as investors grappled
with rate hike news. Yields initially dropped after Powell ruled out the
possibility of 75 bps hikes, but later reversed, with the 2-Year and 10-
Year Treasury yields ending the week at 2.70% and 3.12%, respectively,
and marking the first time since 2018 that 10-Year yields surpassed 3%.
In Europe, 10-Year German Bund yields hit 1% for the first time since
2015 on the back of ECB rate hike expectations, finally ending at 1.13%.
10-Year UK Gilt yields ended at 2.00% after seeing a large mid-week dip
as the BoE raised recession concerns.
FX: The US dollar hit a 20-year high against a basket of currencies,
finally appreciating 0.25% on the week as the equity market selloff
boosted demand. Meanwhile, the euro and pound sterling tumbled
against the US dollar following disappointing German economic data and
a more dovish BoE. The euro and pound sterling ended the week at
$1.0547 and $1.2331, respectively.
ECONOMIC SUMMARY
POLICY: The Fed raised policy rates by 50 bps in May, in line with
consensus expectations, while ruling out the possibility of future 75 bps
hikes. The BoE also lifted rates by 25 bps to 1.0% while downgrading
their medium-term growth forecast. We maintain our expectation of backto-back BoE hikes through August, bringing the policy rate to 1.5%. We
believe risks remain tilted toward further hikes.
LABOR: US Initial Jobless Claims rose 19k to 200k for the week ending
April 30, above consensus expectations. Meanwhile, US unemployment
steadied at 3.6% and US non-farm payrolls added 428k jobs, well above
consensus estimates of 391k. In the Euro area, the labor market
continued to progress, with the unemployment rate falling to 6.8% in
March as the economy further reopened, though Russia’s war in Ukraine
may weigh on the job market in the upcoming months.
ACTIVITY: The US ISM Manufacturing Index printed below consensus
expectations at 55.4 MoM, its lowest reading since 2020 but still in
expansionary territory. The ISM Non-Manufacturing Index also
unexpectedly slowed in April, falling to 57.1 MoM, reflecting persistent
supply-chain constraints.