Last week’s investor focus was firmly on Wednesday’s US CPI inflation print which came in hotter than expected. The 3.5% headline figure exceeded forecasts on the back of increased energy and shelter costs with the index reaching its highest level since September[1]. Expectations of when the Federal Reserve may cut interest rates has now been pushed back to the third quarter of the year, a delay from previous hopes of a June move. Treasury yields rose on the back of the inflation report, the closely watched 10-year security rising by 10 basis points (bps) to 4.52%. This weighed on the more rate sensitive equity sectors, notably utilities and property with the S&P 500 concluding the week -1.6% lower in dollar terms.

European equities struggled with higher sovereign yields also a feature on the Continent last week. The MSCI Europe ex UK index declined by -0.7% (local currency) despite dovish tones from European Central Bank (ECB) President Christine Lagarde following its monetary policy meeting. Weakness in the pound relative to the dollar was supportive of Equities in the UK where the FTSE 100 climbed by +1.1%. The bulk of earnings generated by companies in the index are done so overseas and so a retracement in sterling tends to have a positive translative effect. Japanese equities also advanced last week, the Nikkei 225 rising by +1.4% thanks in part to persistent weakness in the nation’s currency. As for China, the Shanghai Composite recorded a -1.6% fall (local currency) on the back of muted economic data, including further weak inflation numbers alongside lower export and import figures during March[2].

In other news, gold maintained its meteoric rise with the precious metal rising by a further +3.9% to $2,413 an ounce. It has now risen by nearly +18.0% over the past three months with Middle Eastern tensions and strong demand from Chinese and Japanese investors possible drivers. Elsewhere, oil prices traded largely sideways, Brent Crude rising by +1.0% to conclude the week at $91.61 a barrel whilst copper rose by +1.4% to trade close to its highest level for two years.

Week Ahead

Source: Refinitiv Workspace, 15/04/24

[1] Bureau of Labor Statistics – Consumer Price Index Summary March 2024

[2] T. Rowe Price – Global Markets Weekly Update 12/04/2024

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