Equity indices ended deeply in the red following the euphoria stemming from the Fed meeting, which thankfully did not spring any major surprises. But inflation and rate-related angst soon returned to the market as the spectre of recession loomed ever larger. Global economic growth is under strain, caught between an inflationary and monetary shock on the one hand and the conflict with Russia on the other.

Recently, the Fed raised its benchmark policy rate by 0.5 basis points (bp), but the news that gave the markets a temporary boost was that the Federal Open Market Committee (FOMC) is no longer actively considering a 75bp hike in future meetings to get a grip on inflation, according to Chair Powell, who believes that the US economy is in good shape and able to withstand upcoming rate hikes and thus avoid a recession. Despite the 1.4% GDP contraction in the first quarter, household consumption, business investment and hiring all remain strong.

The Labor Department announced that the US economy added 428,000 jobs in April, beating the 400,000 consensus and the identical March number.

The unemployment rate remained at 3.6%, a whisker above the pre-pandemic low, whilst hourly wages rose by 5.5% year-on-year.

Yields on 2- and 10-year Treasuries are hovering at levels not seen since 2018. The 10-year yield has risen above 3%. The 2-year yield spiked to 2.76% minutes before the jobs report.

Elsewhere in the world, the Bank of England, which expects inflation to top 10% before the end of the year, raised its base interest rate by a quarter of a point to 1%. Sweden also raised rates, by 25bp, and Hungary by 100bp. Over in China, the zero-covid policy is proving ineffective against a variant as contagious as Omicron. Lockdowns are increasingly becoming the norm, and Chinese economic growth is slowing, with the Purchasing Manager’s Index (PMI) ebbing to 47.4 last month –below the 50-mark delimiting the threshold for an economic contraction for the second month in a row.

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