Macro Matters – Weekly review, w/c April 1

Markets experienced a mixed but stable week, with US and global stocks consolidating gains amidst economic uncertainty. US data presented a nuanced picture of resilience and caution, while the Bank of Japan addressed currency intervention concerns. Eyes are now on the US employment report and PMI data.

TradeDay Macro Matters

Macroeconomic / Geopolitical Developments

• US and global stocks in positive consolidation

• US data mixed

• Cook and Goolsbee reinforce Fed stance

• Bank of Japan threat of currency intervention

US and Global Stocks in Positive Consolidation

Global markets showed stability in a shortened trading week, with US indices marking gains for the quarter. The S&P 500 achieved its best first-quarter performance in five years, while the Dow Jones also ended at record highs. European markets reflected resilience, with the STOXX 600 hitting a record high despite economic challenges. In Asia, Japan’s Nikkei 225 and China’s CSI 300 indexes saw late-week rebounds.

US Data Mixed

The US economy showcased mixed signals. Q4 2023 GDP was revised up to 3.4%, buoyed by strong consumer spending and business investments. However, consumer confidence dipped slightly due to political concerns. Inflation data painted a nuanced picture—core PCE rose 2.8% annually, while overall spending surged 0.8%, suggesting a complex consumer environment. The Federal Reserve remains cautious, monitoring inflation trends closely before making further rate adjustments.

Cook and Goolsbee Reinforce Fed Stance

Fed officials Austan Goolsbee and Lisa Cook emphasized the central bank’s cautious approach. Goolsbee pointed to three rate cuts this year, while Cook stressed prudence in timing adjustments. Markets responded positively, with increased probability of a June rate cut now at 71.9%. Despite inflationary pressures, the Fed’s focus remains on measured disinflation and economic stability.

Bank of Japan Threat of Currency Intervention

The yen’s decline to a 34-year low against the dollar prompted Japan’s monetary authorities to consider market intervention. The BOJ signaled readiness to act against disorderly currency moves, while maintaining an accommodative stance to support economic recovery. Wider interest rate differentials and stable market conditions limit the likelihood of significant yen depreciation in the short term.

What’s Ahead

Central Bank Watch:

No major activity, but FOMC speakers may provide insights into the US interest rate trajectory.

Macro Data Watch:

04/01/2024: China Caixin Manufacturing PMI; US ISM Manufacturing PMI

04/02/2024: Germany and Italy Manufacturing PMI; German CPI; US Factory Orders, JOLTS Job Openings

04/03/2024: China Caixin Services PMI; US ADP Employment Change, ISM Services PMI

04/04/2024: German and EU Composite PMI; EU PPI

04/05/2024: EU Retail Sales; US and Canada Employment Reports

Other:

US and European markets will reopen Tuesday after the Easter holiday, with reduced liquidity expected early in the week. The US employment report on Friday will be a key highlight, shaping market sentiment.