The past week saw equity markets rally significantly in the US:
- S&P +2.5%
- Nasdaq +4.9%
The European market remained flattish:
- Eurostoxx +0.3%
- FTSE -0.4%
Things were looking mildly upwards in the Asian markets:
- China +1.5%
- Japan +0.7%
On the whole, it seemed to be a continuation from the previous week, on hopes of a strong reopening of China after the Covid-19 shutdowns and expectations of a soft landing in the US (i.e. lower growth but lower inflation too).
MAJOR DATA RELEASE EXPECTED NEXT WEEK
The market has expected the Fed to be dovish at next week’s FOMC meeting and a rate hike of 25bp is priced in.
We had inflation data in the US (PCE) which showed that inflation is not disappearing yet; personal income related data somewhat weaker while employment data remained very strong. Not really a strong inducement for the Fed to become dovish, a disconnect between markets’ anticipations and concomitant economic releases.
Dovish Fed expectations, combined with hawkish ECB expectations have continued to put pressure on the dollar; commodities have proved resilient because of this as have emerging markets.
The coming week will see plenty of releases that may impact the direction of travel:
- FOMC meeting
- Monthly employment data in the US called “NFP (non-farm payroll)”
- ECB meeting.
