Weekly house view | Delayed but not derailed

Weekly house view | Delayed but not derailed

The CIO's view of the week ahead.

The week in review

US stocks got a late-week boost in the form of significant cooling in the nonfarm payrolls report for April as well as a slowdown in wage growth. Reassurances also came from Fed chairman Jerome Powell, who said it was “unlikely” rates would be raised again. Better-than-feared sales figures and a share buyback from one of the Mega Tech stocks also helped the S&P 500 [i] emerge from its sluggishness to register a slight 0.6% gain over the week (in USD). Despite improvements in euro area Q1 GDP and April inflation reports, the Stoxx Euro 600 [ii] declined 0.3% (in euros) whereas Asian equities (ex Japan) continued to power ahead, driven by China. Powell’s relatively dovish comments and the April jobs report provided relief to US Treasuries, with smaller declines in European bond yields. The Japanese yen rebounded strongly on hints at official intervention while the Fed’s perceived dovishness also weakened the USD against other currencies.

Quote of the week

I don't see the ‘stag or the ‘flation, I think it's unlikely that the next policy rate move will be a hike”.

— Fed Chair Jay Powell, referencing risk of stagflation, said on 1 May.

Key data

US nonfarm payrolls rose by 175,000 in April, down from a revised figure of 315,000 in March and short of consensus expectations. The unemployment rate ticked up to 3.9% from 3.8%.  Average hourly wages rose at an annual rate of 3.9% in April, down from 4.1% in March. Euro area GDP growth picked up in Q1, to a quarter-on-quarter rate of 0.3%, compared to -0.1% in Q4 23. Germany saw a significant rebound in quarterly growth in Q1, to 0.2% from -0.5% in Q4 23. Headline inflation in the euro area remained unchanged in April at an annual rate of 2.4%, but core inflation sank to 2.7% from 2.9% in March. The official purchasing manager index (PMI) for Chinese manufacturing for April came in at 50.4, slightly down from 50.8 in March, but the Caixin purchasing PMI rose to 51.4 from 51.1. The official non-manufacturing PMI dropped notably to 51.2 in April from 53 in March. 

[i] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, S&P 500 Composite (net 12-month return in USD): 2019, 31.5%; 2020, 18.4%; 2021, 28.7%; 2022, -18.1%; 2023, 26.3%.
[ii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, STOXX Europe 600 (net 12-month return in EUR): 2019, 27.6%; 2020, -1.5%; 2021, 25.5%; 2022, -10.1%; 2023, 16.5%.
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