Markets held steady last week. Macroeconomic data showed that inflation is slowly easing amid a resilient economy. The first set of quarterly earnings from US banks was also reassuring, highlighting the positive impact of higher interest margins on bottom lines.

Bond yields were also stable over the week with the yield in 10-year Treasuries around 3.50% and the German equivalent at 2.50%.

In the US, the New York Fed’s business activity index, representing the New York area, clocked in at -9.8 versus -10.1 the previous month. In contrast, private sector growth picked up pace, with the composite PMI coming in at 53.5 up from 52.3 the previous month. The services component was better than expected at 53.7 compared with the 52.6 forecast.

On the employment front, initial jobless claims rose by 5,000 to 245,000 in the week beginning 10 April versus 240,000 in the previous week.

As we can see, the labour market is still solid and inflation is slowing, though remaining above the Fed’s long-term target. The market has priced in a quarter-point increase in the benchmark policy rate next week, possibly followed by a hiatus in rate hikes.

In the Eurozone, consumer price inflation slowed up in March but core inflation was still high. The headline index was down at 6.9% year-on-year but up 0.9% month-on-month, in line with expectations. Core inflation – which excludes food and energy – slowed to 7.5% year-on-year last month.

The Eurozone’s composite PMI, for manufacturing and services, recovered from 53.7 in March to 54.4 this month, pointing to buoyant private sector activity in April.

In Germany, producer prices fell 2.6% month-on-month in March, resulting in an annual increase of 7.5%, slower than in February (+15.8%).

Over in China, growth in economic activity accelerated to a sharper degree than expected, driven by household consumption, while construction investment continued decreasing. GDP was up 4.5% year-on-year and retail sales rose by 10.6%. The renewed momentum in consumer spending has been part of the reason behind the solid quarterly revenue reports by LVMH, Hermès and L’Oréal, all luxury goods groups.

Against this backdrop, the S&P 500 ended the week more or less unchanged (-0.10%). The tech-heavy Nasdaq edged down by a modest 0.42%. The Stoxx 600 Europe ended the week up slightly (+0.45%).

Highlights this week will be the next batch of corporate earnings, plus durable goods orders and PCE inflation out of the US.

Source: Bonhôte

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