The numbers for the week – 22 Apr 24

The numbers for the week – 22 Apr 24

Markets last week

  • Robust US economic data led to lower equity markets and higher bond yields
  • Strong retail sales compounded recent upside surprises in inflation and employment data, which further softened interest rate cut expectations
  • US two-year treasury yields closed at 4.99%, showing resilience at the 5% level. This is likely to remain a key reference point
  • US equities suffered a 2.6% decline in GBP terms, with technology the worst-performing sector
  • Defensive sectors like consumer staples and utilities outperformed, while value stocks surpassed growth stocks
  • UK inflation and wage growth exceeded expectations, although on a year-on-year basis the trend still points to further easing of price pressures
  • The Japanese stock market experienced a 5.3% decline, driven by weakness in the semiconductor sector
  • The Japanese yen weakened against the dollar, deviating from its traditional risk-off behaviour
  • Tensions in the Middle East impacted sentiment
  • This week, Q1 GDP data for the US suggests a slowdown but still a good rate of economic growth
  • US personal consumption expenditures (PCE) inflation data is expected to tick up slightly to 2.6% in March, where it is expected to remain lower than the consumer price index (CPI) reading by an unusually large margin
  • Markets have been reacting negatively to recent positive economic surprises as they lower the likelihood of interest rate cuts. This is an interesting dynamic to watch in the week ahead
  • It is a busy week for corporate earnings with US tech and UK banks reporting.


Last week witnessed robust economic data from the US, sending equity markets lower and bond yields higher. Strong retail sales, coupled with recent upside surprises on inflation and employment, led market participants to soften their expectations on interest rate cuts further. US two-year treasury yields pushed higher to finish the week at 4.99%, having come into some support at the 5% level. This level seems fair for short-term rates. US Federal Reserve (Fed) Chairman Powell’s stance on interest rate policy remains data-dependent and the evidence suggests that further hikes remain unlikely.

US equities suffered a 2.6% decline in GBP terms, marking the third consecutive weekly drop. Notably, the technology sector bore the brunt, declining 7.2%, with Friday witnessing the sector’s worst performance of the year so far. Investors trimmed their exposures ahead of a busy week this week for ‘big tech’, as four of these key companies report their earnings. Last week defensive sectors such as consumer staples and utilities were the best performing. Cheaper ‘value’ stocks outperformed more expensive ‘growth’ type stocks.

In the UK, inflation and wage growth exceeded expectations. March headline inflation was hotter than anticipated, particularly the monthly reading, which came in at 0.6% (the same as in February) vs. consensus expectations of 0.4%.

The positive news for the UK is that on a year-on-year basis inflation continues to subside. CPI has fallen below that of the US for the first time since Q1 2022. Sticky core inflation, which excludes volatile food and energy components, dropped to 4.2% from 4.5%. Given that the UK economy is not as strong as the US, it seems more likely that disinflation at home will continue. UK gilts led government bond yields higher last week, with the two-year closing at 4.38% and the 10-year at 4.23%.

Japan faced pressures as the stock market fell 5.3% – the biggest weekly decline since June 2022. However, in the global market, there was particular weakness in the critical Japanese semiconductor space as a key chipmaker reduced their expectations for market growth. It was these ‘chip’ stocks that led the index decline. The Japanese equity market remains up 4.2% year-to-date but has come off its all-time highs in the last few weeks.

The Japanese yen weakened -0.9% against the dollar, continuing a long-term trend. The currency faces several headwinds but is traditionally considered a risk hedge (it usually performs well in risk-off environments). Given that risk sentiment last week was poor, it is notable that the yen did not exhibit its usual defensive characteristic.

Uncertainty continues surrounding tensions in the Middle East following Iranian missile attacks on Israel, impacting sentiment. Market movements are likely to continue to depend on geopolitical developments as well as upcoming inflation data, with the 5% level on two-year treasuries currently serving as a key reference point for traders. It is set to be a particularly busy week for corporate earnings, with eyes on the big tech names reporting in the US.

The week ahead

Thursday: US Q1 GDP growth

Our thoughts: Economic growth in the US is expected to have slowed to 2.5% from 3.4% in Q4 2023. Much of the economic data has surprised to the upside in Q1 and there has been a re-emergence of the negative market reactions to positive economic surprises. This is because strong economic performance lowers the chances of interest rate cuts. Given this trading pattern, the risk comes from any potential upside surprise to economic growth. This seems quite likely, given economic surprises have skewed positively in Q1.

Friday: US PCE Inflation

Our thoughts: The Fed’s preferred measure of inflation has offered somewhat of a paradox in recent months as it has diverged from the more commonly referred to CPI measure. Historically, the difference between the two measures has tended to be less than 0.5%, but it is currently more than 1%, with the PCE measure falling closer to the Fed’s 2% target. The PCE data for March, released on Friday, is anticipated to tick up slightly to 2.6% from 2.5% in February, remaining significantly lower than the March CPI reading of 3.5%.

Friday: BoJ rate decision

Our thoughts: At their last meeting the Bank of Japan (BoJ) hiked rates for the first time in 17 years, abandoning their negative interest rate policy. No such excitement is expected this week as the BoJ are anticipated to hold rates steady in light of continued healthy wage growth and a weak currency. Analysts will be closely analysing Governor Ueda’s words for any guidance on future policy tightening. Most analysts believe that the BoJ are likely to hike more this year and possibly start quantitative tightening.

The numbers for the week


Sources: FTSE, Canaccord Genuity Wealth Management


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