Weekly house view | Ironclad at work

Weekly house view | Ironclad at work

The CIO's view of the week ahead.

The week in review

US markets were hit by inflation data that forced market participants to dial back on their expectations for Fed rate cuts as well as by fears of a flaring-up of conflict in the Middle East. Muted forecasts from banks at the end of the week also contributed to risk-off sentiment and a rise in equity volatility. Growing confidence that ECB rate cuts are coming in June ensured that the Stoxx Europe 600 fared better, returning -0.1%[i] (in euros) last week against the S&P 500’s -1.5%[ii] (in USD), while Japan’s Topix rose 2.1%[iii] (in yen). Diverging rate cut scenarios meant that government bond yields in the US rose while Bund yields fell, with stubborn inflation expectations behind the spike in shorter-term US yields. The yen fell to a 34-year low against the USD, with steep falls also for the Swiss franc and euro. Gold set another record high last week, seemingly impervious to higher US yields. Oil was down, but industrial metals marched ahead on hopes of a revival in Chinese manufacturing.


President Joe Biden promised “ironclad” US support for Israel and duly helped defend it against Iran’s missile and drone attack on April 13. The Iranian assault raises tensions in the wider Middle East and Israel’s reaction will now be crucial. The US is trying to de-escalate the situation.

Key data

The US consumer price index (CPI) rose to an annual rate of 3.5% in March from 3.2% in March and 3.1% in January. The core CPI came in March was 3.8%, unchanged from February. The producer price index (PPI) was not so hot, but still rose at an annual 2.1% in March, up from 1.6% in February. Whereas the US faces persistent inflation pressure, deflation is a worry in China, where the CPI rose just 0.1% year on year in March, down from 0.7% the previous month. Stripping out food and energy, annual core CPI declined to 0.6% from 1.2% in February. Annual PPI was -2.8% in March. German industrial production picked up in February, rising 2.1% over January, when production also rose on a month-over-month basis. But February industrial production was still 4.9% lower than a year before and new manufacturing orders were 10.6% lower.  

[i] 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%.
[ii] 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%.
[iii] Source: Pictet WM AA&MR, Thomson Reuters. Past performance, TOPIX (net 12-month return in JPY): 2019, 15.2%; 2020, 4.8%; 2021, 10.4%; 2022, -5.1%; 2023, 25.1%.
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