United States
The major stock market benchmarks closed the week positively, as investors carefully considered mixed signals of slowing economic growth and easing inflation pressures. Materials and industrials sectors performed well in the S&P 500 Index, while technology shares lagged, largely due to a decline in graphics and artificial intelligence chipmaker NVIDIA. Due to European closed markets for the Easter holiday, trading was light early in the week.
Investor activity picked up towards the end of the week as they awaited Friday’s start of the quarterly earnings season. Reports from banking giants JPMorgan Chase, Wells Fargo, and Citigroup exceeded consensus estimates. Some analysts attribute their performance to customers moving deposits from smaller, regional banks that have faced scrutiny following recent bank collapses. Overall, earnings for the S&P 500 were expected to decline 6.5% year-over-year in the first quarter, but the financial sector was anticipated to show moderate growth.
One of the most anticipated events of the week was the release of the consumer price index (CPI) for March by the Labor Department on Wednesday. Stocks initially rose as the CPI only increased by 0.1%, slightly below expectations, bringing the year-over-year rate to 5.0%, the slowest pace since May 2021. However, the indexes fell back later in the day, partly due to comments from Federal Reserve Bank of Richmond President Thomas Barkin, who indicated that there is still more work to address inflation concerns.
On Thursday, there was further positive news on the inflation front, as the core producer price index, which excludes food and energy, declined by 0.1% in March. This marked the first decrease in the prices that businesses pay for inputs since the height of the pandemic shutdowns in April 2020, suggesting that better prices may be on the horizon for consumers.
Europe
The week saw a rise in European stocks as concerns about a recession diminished. The pan-European STOXX Europe 600 Index rose 1.74% in local currency terms over the five trading days ending April 14, with major indexes such as Germany’s DAX up 1.34%, Italy’s FTSE MIB up 2.42%, France’s CAC 40 Index up 2.66%, and the UK’s FTSE 100 Index up 1.68%. European government bonds also rose as investors weighed the possibility of further policy tightening by the European Central Bank.
Eurozone industrial production for February was stronger than expected, with a sequential increase of 1.5% and a year-over-year rise of 2.0%. Higher output of capital goods and non-durable consumer goods were the main drivers. However, retail sales volumes fell 0.8% sequentially in March, in line with forecasts. Meanwhile, as measured by the Sentix index, investor morale resumed an upward trend in April after an interruption in March.
Official data indicated that the UK economy appeared to be defying a Bank of England forecast for a recession in Q1, with GDP remaining flat month over month in February, slightly below expectations due to public service strikes. However, the revision of January’s GDP figure showed a 0.4% expansion that month. Despite this, the IMF still forecasts a 0.3% shrinkage of the UK economy in 2023, albeit lower than its previous projection.
Finally, France’s Constitutional Council ruled that a law to increase the pension age was valid, raising the possibility of more public protests.
Japan
The Nikkei 225 Index and the TOPIX Index rose over the week, with the former up 3.54% and the latter up 2.71%. Investor sentiment was bolstered by news that Berkshire Hathaway, a prominent investor, planned to increase its investments in Japan. Furthermore, dovish comments from newly appointed Bank of Japan Governor Kazuo Ueda contributed to the positive market sentiment and a weaker yen. Ueda indicated that while a major change in monetary policy was not imminent, a review of the central bank’s large-scale easing stance could be considered in the near future. The yen weakened against the U.S. dollar, and the 10-year Japanese government bond yield remained stable at 0.46%, with expectations of continuity in monetary policy under Ueda.
Ueda’s first press conference after being sworn in as governor on April 9 conveyed a dovish stance that supported market sentiment. He stated that since the negative interest rate policy has been the basis of strong monetary easing, it is appropriate to continue until the central bank’s 2% inflation target is attainable. Once the target is achievable, the policy normalisation process can begin. Additionally, Ueda suggested continuing with the current yield curve control framework was appropriate given the economic, price, and financial environment.
China
Investor sentiment in China was affected by softer-than-expected inflation, leading to mixed performances in the stock market. Despite better-than-expected new loans and trade data, concerns about the strength of the economic recovery persisted. The Shanghai Stock Exchange Index increased by 0.32% in local currency, while the blue-chip CSI 300 declined by 0.76%. However, Hong Kong’s benchmark Hang Seng Index gained 0.53%.
China’s consumer price index rose 0.7% in March compared to the same period the previous year, a decline from the previous month’s 1% rise. Core inflation, which excludes volatile food and energy prices, increased to 0.7% in March from 0.6% in February. Reuters reported that the producer price index slid 2.5%, marking its sixth consecutive monthly decline and reaching its lowest since June 2020.
The latest data fell short of the government’s target of around 3% growth in the consumer price index this year, which led to expectations of additional stimulus measures from the People’s Bank of China (PBOC). China’s 10-year government bond yield declined to its lowest level since November 2021 as traders anticipated further monetary easing.
Market indices
|
|
Weekly Index |
|
YTD Index |
|
|
Index |
Local Currency |
Sterling Pound |
Local Currency |
Sterling Pound |
|
UK |
|
|
|
|
|
FTSE 100 Index |
1.76% |
1.76% |
6.90% |
6.90% |
|
US |
|
|
|
|
|
S&P 500 Index |
0.81% |
0.74% |
8.14% |
4.54% |
|
Europe |
|
|
|
|
|
Euro Stoxx 50 |
1.90% |
2.62% |
14.39% |
14.05% |
|
Asia |
|
|
|
|
|
Nikkei 225 Index |
3.54% |
2.17% |
8.39% |
3.59% |
|
Hang Seng Index |
0.53% |
0.46% |
6.15% |
2.02% |
|
Global |
|
|
|
|
|
MSCI World |
1.17% |
0.81% |
8.31% |
4.87% |
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