Most major equity markets ended last week in positive territory with investors buoyed by weakening inflation in the US. Headline CPI declined by 100 basis points (bps) to 5.0% during March[1] which was below expectations and the lowest the index has been since 2001. The reduction reflected lower energy prices relative to the same month last year when prices surged in the wake of Russia’s invasion of Ukraine. Core CPI, which calculates inflation without the impact of energy and food prices, remained more stubborn however, March’s 5.6% figure being 10bps above the previous month with housing costs continuing to accelerate.
The US Dollar slipped to a 1 year low on the back of the data’s publication with Sterling and the Euro ending the week +0.1% and +0.8% higher against the greenback respectively. As for the S&P500, it added +0.8% with strong gains seen in both the materials and industrials sector which helped to offset some weakness amongst the index’s technology constituents[2]. Elsewhere, the FTSE100 and FTSE250 rose by +1.7% and +2.4% respectively whilst in Europe, easing recessionary fears helped the MSCI Europe ex UK index to climb by +1.9%. Moving to Japan, the Nikkei 225 jumped by +3.5% with support coming from dovish comments made by new Bank of Japan Governor Kazuo Ueda. As for Chinese equities, the Shanghai Composite rose by +0.3%.
Looking at commodities, oil prices recorded weekly gains with Brent Crude gaining by +1.4% to $86.38 barrel. The fourth consecutive weekly gain reflected comments from the International Energy Agency who pointed towards significant demand gains later in the year due to China amid further production cuts by OPEC. Copper also made gains on higher future demand expectations with the metal jumping by +2.5% to $9,030 a tonne. With investors favouring risk assets, gold dipped back below the $2,000 an ounce threshold after a -0.5% fall dropped it to $1,999.[3]
Week Ahead
CPI inflation is the standout figure due from the UK this week with the headline index expected to have slowed to 9.8% last month from 10.4% back in February. Other figures to monitor include unemployment, retail sales and flash purchasing manager indices (PMI’s) covering the first three weeks of April. The housing sector in the US comes back into focus with several key figures due including building permits, housing starts and existing home sales. The Federal Reserve (Fed) also publishes its bimonthly Beige Book which includes various key data points from various regional Fed banks. On the Continent, flash PMI’s are also due alongside the final reading of March’s CPI inflation number. German research institute ZEW also publishes its monthly economic sentiment indicator on Tuesday. It’s a busy week for Chinese data releases with Q1’23 GDP the standout figure due during the early hours of Tuesday morning. Industrial production, retail sales and unemployment are also published at the same time. As for Japan, revised industrial production and a sole flash PMI covering the manufacturing sector are released later in the week.[4]
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[1] US Bureau of Labor Statistics, 17/04/23
[2] T. Rowe Price, 17/04/23
[3] Refinitiv, 17/04/23
[4] Forex Factory, 17/04/23
SJP Approved 17/04/23