INFLATION IS EASING

Stock markets remained fairly flat last week. Economic data show that inflation continues to edge down along with job creation in the US, a trend that could prompt the Federal Reserve to bring its monetary tightening cycle to an end. Even so, the health of America’s regional banks and the issue of raising the debt ceiling are still generating concern..

Bond yields also remained stable. The US 10-year yield currently stands at 3.45%, compared with 2.30% for its German counterpart.

Growth in US consumer prices eased in April, in line with expectations. The CPI rose 0.4% and is now running at 4.9% year on year. The core CPI, ex food and energy prices, was up 0.4% in April, also as expected, bringing its year-on-year increase to 5.5%.

In the US labour market, weekly jobless claims increased significantly last week to 264,000, up by 22,000 over the week-earlier figure of 242,000.

Meanwhile, producer prices rose less than anticipated in April. The PPI gained 0.2% compared with its March level and is up 2.3% year on year.

Finally, US consumer confidence has fallen sharply in May according to the monthly survey conducted by the University of Michigan. The index now stands at 57.7 as against 63.5 in April, dragged down by the deteriorating economic outlook.

In Europe, Germany’s inflation likewise continued to slow in April. The harmonised CPI was up 7.6% year on year and up 0.6% on its March level. These figures were in line with initial forecasts and marked the second consecutive monthly decrease.

Chinese imports were down in April while growth in exports declined. Despite this, Q1 GDP growth outpaced forecasts thanks to solid consumption of services even as industrial production flagged. Imports into the world’s second-largest economy were down 7.9% year on year in April after falling 1.4% in March, while export growth was running at 8.5%, marking a slowdown compared with the 14.8% growth rate clocked in March.

In this context, the S&P 500 ended the week down by 0.29% whereas the Nasdaq index of tech stocks rose 1.29%. The Stoxx 600 Europe was up more moderately, by 0.04%.

Source: Bonhôte

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