GLOBAL CAPITAL MARKETS OVERVIEW:  

U.S. stocks closed lower for a second straight session on Friday. Still, they remained off session lows as investors continued to assess the impact of tightening global monetary policy against a backdrop of high inflation and a challenging growth outlook. However, a better-than-expected jobs report supported expectations that higher interest rates have so far not slowed job creation. Nonfarm payrolls rose by 428,000, while average hourly earnings rose slightly. On the earnings front, Under Armor tumbled on disappointing guidance from the apparel company. Live Nation Entertainment also slipped after first-quarter revenue fell short of Wall Street expectations. The Dow Jones Industrial Average fell less than 100 points, rebounding after falling more than 450 points earlier; the S&P 500 lost 0.6%, and the Nasdaq lost 1.4%. All three major indexes fell for a fifth straight week, the longest losing streak for the S&P since June 2011 and the longest losing streak for the Nasdaq since November 2012.The TSX S&P/TSX Composite fell 0.3% to 20,633 on Friday, extending the previous session's 2.3% loss to its lowest level since Jan. 27. The decline was most pronounced in the tech sector, as higher interest rates could hurt the valuations of these companies, especially as their profits rise further in the future. The Bank of Canada will continue its hawkish stance as Canada's unemployment rate hit a record low of 5.2 percent in April. Bank of China Governor Macklem said the central bank was prepared to raise interest rates sharply "if necessary" to curb rising consumer prices. Shopify and Ballard Power Systems were the biggest laggards in the index, down 8% and 7%. For the week, the index fell 0.6%. Major European stock indexes fell sharply on Friday, with the sell-off on Wall Street also intensifying, with Germany's DAX and the pan-European Stoxx 600 both down 1.6 percent to eight-week lows. Investors are concerned that inflation has become increasingly difficult to resolve after upbeat U.S. jobs data reinforced the view that the Federal Reserve may become more hawkish in response to soaring exit costs. Most sectors closed in negative territory, with retail stocks leading losses, while oil and gas companies bucked the trend and gained 0.7%. ING's profit disappointed in earnings season, while Adidas' operating profit beat estimates, as the sportswear company now sees full-year revenue at the low end of its outlook range. The DAX fell 3.4% on the week, and the Stoxx 600 lost 4.3%. On Friday, the FTSE MIB index fell 1.2% to close at 23,476, closing the week down 3.2% as investors focused on corporate earnings, fears of rising inflation, and expectations of tighter monetary policy. Financials were the biggest losers, with Italy's biggest lender Intesa Sanpaolo down 2.3% after cutting profit guidance due to its exposure to Russia. UniCredit fell 4%, also hurt by Russia exposure. Moncler, meanwhile, fell 4.2 percent, posting a sharp drop for the second straight session after the luxury brand said it could only beat analysts' revenue estimates if China's economy goes unrestricted by July. On the other hand, Leonardo closed higher after posting a net profit of 74 million euros in the first quarter of the year, compared with a loss of 2 million euros a year earlier. the CAC 40 index fell 1.7%, or 110 points, to close at 6,258, extending its third straight session of losses as fears of aggressive tightening roiled global markets. Domestically, strong downward pressure came from luxury stocks Kering (down 2.8%), Louis Vuitton (down 2.1%), Hermès (down 3.2%), and technology stocks Capgemini (down 3.0%) and Dassault Systèmes (down 4.8%). On the earnings front, AXA fell 1.5% after revenue rose 2% in the first quarter, and its 2023 outlook remained unchanged. For the week, the index fell 4.6%. The FTSE 100 fell 1.8% to 7,371, its lowest since March 16. As earnings season continues, global markets have seen bear market sentiment amid stagflation concerns and pressure from tightening monetary policy. Shares in IAG, owner of British Airways, tumbled nearly 8% after the company reported a worse-than-expected operating loss of 787 million euros in the first quarter of 2022. Still, as it plans to cut flights, Arrangements were raised to 80% of pre-pandemic levels, and the company expects to return to profitability in the June quarter. Meanwhile, hotel operator InterContinental said travel demand grew in almost all of its major markets, driven by a recovery in leisure, business, and group travel. A month later, ad agency S4's annual results showed revenue doubled for 2021, although EBIT turned to a loss of £56m from £3m the year before. On a weekly basis, the index would be down more than 2%. For the week, the London index fell 1.8%.The MOEX-Russia Index fell 0.5% to close at 2,383 on Friday, ending a brief 2.5% drop for the week as more sanctions loomed and the Russian economy could continue to contract. The European Commission proposed changes to the sixth set of sanctions announced on Wednesday to allow more time for countries dependent on Russian oil to phase out imports, bolstering expectations that the embargo will come. Financials were the hardest hit, with Sydney's Veolia down 1.6%, the Russian Federal Reserve down 1.4%, and energy giant Lukoil down 0.9%. However, selling pressure from the sanctions has been relatively limited because Russian markets are artificially supported by capital controls, including a ban on short-selling stocks and foreigners from selling Russian shares. MOEX will be closed on Mondays and Tuesdays to celebrate Victory Day.Hong Kong stocks tumbled for a third straight session, with the benchmark Hang Seng Index down nearly 4 percent to close at about 20,000, its worst week since late February. Defensive sectors such as consumer staples and health care sold off heavily, a sign of growing concern among investors about economic growth due to high inflation and aggressive monetary policy tightening. At home, the Hong Kong Monetary Authority on Thursday raised its benchmark interest rate by 50 basis points to 1.25%, amid growing fears that the local currency will weaken further due to capital outflows. In terms of economic data, retail sales in Hong Kong fell 16.8% year on year in March, the second consecutive month of decline. China Resources Beer Holdings and Country Garden Services Holdings were the biggest laggards in the index, down about 10% each. On Friday, the Shanghai Composite fell 2.16 percent to 3,002 points. The Shenzhen stock market fell 2.14 percent to 10,810 points, ending several days of strong gains after China's top policy-making body warned against criticism of its controversial "Dynamic Zero Covid-19" policy. The zero-tolerance approach, which relies on draconian lockdowns and mass testing, has severely impacted the economy and disrupted supply chains vital to international trade. Chinese stocks also tracked a slump in global equities amid concerns that aggressive tightening by central banks around the world to rein in expanding inflationary pressures could hurt economic growth. All sectors on the mainland fell, led by heavyweight technology, materials, and consumer stocks. Hangzhou Hikvision (down 9%), Oriental Currency (down 3.9%), CNOOC (down 3.2%), Zijin Mining (down 7.1%), Kweichow Moutai (down 2.4%), and China Tourism (down 8.9%) suffered substantial losses. The benchmark index fell for a fifth straight week. New Zealand S&P/NZX index fell 138.22 points, or 1/18%, to settle at 11,609.38 on Friday, its lowest close since mid-August 2020, and was down 2.3% for the week, tracking Wall Street's overnight slump as people grew increasingly. There are growing concerns that aggressive tightening policies to curb inflation worldwide could dampen the global post-pandemic recovery. Locally, consumer prices in New Zealand rose 12.19% year-on-year in the first quarter, the highest level in more than 30 years, and the Reserve Bank of New Zealand recently said it would maintain inflation expectations to prevent further rises. Traders were also nervous as Beijing stepped up its zero-coronavirus policy. Reuters quoted state television as saying China would oppose any remarks and actions that distort, doubt, or deny China's response to the outbreak. The biggest decliners were New Zealand Oil & Gas Ltd (7.2%), Solution Dynamics Ltd (6.4%), and Rua Bioscience Ltd (5.1%). Australia S&P/ASX 200 index fell 2.16% on Friday to close at 7,206, its lowest level in more than a month, amid concerns over aggressive moves by central banks around the world to curb mounting inflationary pressures. Austerity measures could hurt economic growth. Investors also digested the latest monetary policy statement from the Reserve Bank of Australia. Inflation is likely to exceed expectations this year. The statement said that the bank would need to raise interest rates further as unemployment is expected to fall to its lowest level since 1974. Technology stocks led losses, with Xero Ltd (-9.1%), Wisetech Global (-5.6%), Seek Ltd (-6.6%) and NextDC (-5.4%) down sharply. All other sectors participated in the sell-off, with sectors related to materials, financials, healthcare, and clean energy suffering heavy losses. Meanwhile, after a bumper year, Macquarie Group shares fell 7.8% after being warned of a slowdown in its commodities trading and capital businesses. The benchmark index fell 3.1% for the week.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CN: In April 2022, China's foreign exchange reserves fell for the fourth consecutive month to $3.120 trillion, the lowest. These figures compare to market forecasts of $3.133 trillion. Gold reserves stood at 62.64 million ounces at the end of April, unchanged from the end of March. The value of China's gold reserves fell from $121.66 billion at the end of March to $119.73 billion at the end of April.

- US: U.S. consumer credit rose by $52.43 billion in March 2022, up from a downwardly revised $37.7 billion last month and above consensus expectations for a $25 billion increase. It was the most significant monthly increase in consumer credit since December 2010, with non-revolving recognition increasing by $21.07 billion while revolving credit increased by $31.37 billion. Consumer credit grew at a 14% annual rate after a 10.2% downward revision in February.

- US: The U.S. unemployment rate remained unchanged at 3.6% in April 2022, the lowest level since February 2020, compared with market expectations of 3.5%. The number of unemployed was 5.941 million, a decrease of 11,000, and the employment level was 158.105 million, a decrease of 353,000. Meanwhile, the labor force participation rate fell to 62.2% in April from 62.4% in March.

- US: Average hourly earnings for all employees in U.S. private nonfarm payrolls rose 10 cents, or 0.3%, to $31.85 in April 2022, after increasing 0.5% in March and missing consensus estimates of 0.4%. Average hourly earnings for private-sector production and non-supervisory workers rose 10 cents, or 0.4%, to $27.12. Average hourly earnings rose 5.5% over the past 12 months, compared with a 5.6% increase in March.

- US: The U.S. economy added 428,000 jobs in April 2022, the same as the downwardly revised 428,000 jobs in March and above the forecast of 391,000 jobs. That marked the 12th straight month that employment topped 400,000 but fell from 7.14 million in February amid an increasingly tight labor market. Employment increased in all industries, with the most significant increase in leisure and hospitality (78K), namely restaurants (44K) and lodging (2200); manufacturing (55K), mainly durable goods (31K); As well as shipping and warehouse (52K). Still, China's economy is more robust than before the pandemic, as leisure and hospitality (£1.44m), local government (£596,000), and education and health services (£40,900) remain well below March 2020 levels Levels fell by £1.2 million. Economists believe the labor market could soon start to slow as the economy nears full employment, which will provide some relief from the heat of wage growth at a time when inflation reaches levels not seen since 1981.

- CA: Canada's Ivey PMI fell to 66.3 in April 2022 from 74.2 the previous month, a 16-year high. In April, supplier delivery times increased significantly (from 34.8 in March to 37.8), and business inventories grew slower (65.1 to 64.1). Meanwhile, employers have stepped up staffing efforts, employment has increased faster (65.1 from 62.5), while inflation accelerated to its highest level in three months (90.2 from 89.6).

- CA: The Canadian economy added 15.3 million jobs in April 2022, after adding 75,000 jobs in March, well below the consensus forecast of 55,000. In addition to an increase of 471,000 part-time jobs, the involuntary part-time employment rate fell to a record low of 15.7% but was almost offset by a decline of 316,000 full-time jobs. Employment increased in the service-producing sector (314K), mainly in public administration and professional, scientific, and technical services, but decreased in the goods-producing sector (-16K), mainly in construction. Across Canada, employment rose more sharply in the Atlantic region and Alberta but declined in Quebec.

- UK: The S&P Global/CIPS UK Construction PMI fell to a three-month low of 58.2 in April 2022 from 59.1 in March but still showed strong growth in the construction sector. According to reports, new orders rose at their weakest pace in four months due to rising raw material prices and, in some cases, indecision due to rising borrowing costs and geopolitical uncertainty. Meanwhile, supply chain delays are due to shortages of personnel, materials, and transportation, exacerbated by port delays and the war in Ukraine. Average costs have also risen sharply due to higher energy, fuel, and raw material costs. On the other hand, job growth was highest in three months. Meanwhile, growth forecasts fell to their lowest level since September 2020.

- TW: Taiwan's annual inflation rate rose to 3.38% in April 2022 from 3.27% in the previous month, beating market expectations of 3.25%. This was the highest inflation rate since August 2012, with both food prices (6.91% vs. 5.90% in March) and housing prices (1.78% vs. 1.55%) recovering. The upward pressure on the transport and communications sector was also high but eased slightly this month (5.01% vs. 5.92%). Meanwhile, core inflation accelerated to 2.53% from 2.47% in March. The consumer price index rose 0.39% on a seasonally adjusted monthly basis, down from an upwardly revised 0.80%.

- SW: Total orders received by the Swedish industry rose 6.5% year-on-year in March 2022, a sharp acceleration from February's downwardly revised 1.1% increase. Orders from overseas customers increased by 8.2%, and orders from Swedish customers increased by 4.0%. Seasonally adjusted monthly orders rose 3.9%, boosted by demand in the manufacture of fabricated metal products, excluding machinery and equipment (8.3%).

- SW: In March 2022, Swedish industrial output rose by 0.8% year-on-year, down from a downwardly revised 1.4% in the previous month. This was the third straight month of growth in industrial production, but the change was the weakest as manufacturing output growth slowed (0.7% in February vs. 1.6% in February). Meanwhile, mining and quarrying production rebounded sharply (7.0% vs. -2.5%). Industrial production rose 0.4% on a seasonally adjusted monthly basis, up from a revised 0.2% drop in February.

- RU: In April 2022, the S&P Global Russia Services PMI rose to 44.5 from a 22-month low of 38.1 in March. The services sector shrank for a second straight month, the latest data showed, with output and new orders both contracting as sanctions reduced customers' purchasing power. Meanwhile, new export orders fell for the second time in many months, the strongest since May 2020, aside from a low in March. Meanwhile, the employment rate fell to its second-highest level since October 2020. Despite the low employment rate, the backlog of jobs fell at the fastest pace since May 2020. On the price front, input cost inflation accelerated to the second-highest level. As a result, output cost inflation accelerated to the second-fastest pace since October 2001. Finally, businesses remain pessimistic about inflationary pressures and further declines in employment amid cost-cutting efforts.

- RU: The S&P Global Russia Composite PMI climbed to 44.4 in April 2022 from a 22-month low of 37.7 in March, with declines in both manufacturing and services easing. Still, the latest figures show private sector activity contracting at the second-fastest pace since the early days of the pandemic in May 2020, new orders hiring again, while employment has fallen steadily. At the same time, manufacturers' backlogs declined more slowly, while service providers declined more rapidly. Despite easing from the most recent peak in March, inflation in input prices and output costs was the fastest as sanctions pushed up imported input prices. Companies are also trying to pass the higher costs on to customers.

 

LOOKING AHEAD:   

Today, investors will receive:

- USD: Final Wholesale Inventories m/m, and Loan Officer Survey.

- JPY: Average Cash Earnings y/y, and Monetary Policy Meeting Minutes.

- CNY: Trade Balance, and USD-Denominated Trade Balance.

- EUR: French Trade Balance and Sentix Investor Confidence.

- CAD: Building Permits m/m.

- GBP: MPC Member Saunders Speaks.

 

KEY EQUITY & BOND MARKET DRIVERS:

- CA: Canada's 10-year government bond yield moved in line with U.S. Treasuries at 3.09%, the highest in more than a decade, as both countries experienced historical labor market tightening, further strengthening the Bank of Canada's The rationale for more aggressive tightening by U.S. counterparts. In April, Canada's unemployment rate increased to 5.2%, while the U.S. economy added 428K jobs. Both economies face decades of high inflation. Bank of China Governor Macklem said the central bank could raise interest rates sharply "if necessary" to counter rising prices, as the overnight rate target has been submitted by 125 basis points so far this year to 1%.

- US: The yield on the 10-year U.S. Treasury note, which sets the tone for global corporate and household borrowing costs, topped 3.1%, its highest level since November 2018, as the Federal Reserve's tightening cycle pushed rates higher at the Federal Open Market Committee (FOMC). It was in full swing after 50 basis points, while investors also digested upbeat employment data. The U.S. economy added 428,000 jobs in April, the same as the downwardly revised payrolls in March and about 40,000 more than market forecasts, leading analysts to believe that a hawkish Fed is. On Wednesday, Chairman Powell hit back on bets on a more aggressive 75 basis-point rate hike. Still, expectations for more aggressive tightening persist as inflation hits a 40-year high and the economy recovers.

- US: U.S. stock futures, which track the broader market, pared early losses and moved into positive territory for the time being after the jobs report after negative sentiment around the impact of tightening global monetary policy regained control on Wall Street. Investors reacted to a better-than-expected jobs report showing that higher interest rates are not slowing job creation. The Labor Department's closely watched employment report showed nonfarm payrolls rose by 428K, while average hourly earnings rose slightly more slowly. However, investors are cautious about economic growth, supported by runaway inflation and aggressive monetary tightening. In regular trading on Thursday, the Dow Jones Industrial Average fell more than 1,000 points, and the tech-heavy Nasdaq Composite tumbled nearly 5%, with both indexes posting their worst one-day losses since 2020. The S&P 500 also fell 3.6% on its second-worst day of 2022.

- GE: Germany's 10-year bond yield rose above 1 percent to its highest level since 2014, as worries about rising inflation and expectations of tighter monetary policy amplified bond selling in Europe. Preliminary data showed that inflation in the eurozone hit a record 7.5 percent in April, while domestic data was the highest since 1981. European Central Bank policymakers signaled that asset purchases could end as early as July, a condition for raising interest rates. Meanwhile, a new round of EU sanctions restricting Russian oil will likely prolong the surge in energy prices underlying rising inflation figures. The Fed raised its benchmark interest rate by 50 basis points at its May meeting, the most significant increase since 2000.

- JP: The yield on the benchmark 10-year Japanese government bond rebounded sharply to a six-year high of 0.257% on Friday, surpassing the Bank of Japan's target ceiling of 0.25% at the end of a busy week for interest rate decisions. The Federal Reserve and Bank of England hiked their respective rates to 1%. At the same time, last week, the Reserve Bank of Australia raised its key rate by 25 basis points, beating expectations to 0.35%, as warnings of double-digit inflation reverberated overseas. In Japan, the reality contrasted sharply as the latest inflation gauge rose to a more than three-year high of 1.2 percent. Last week, the Reserve Bank of Australia raised its key rate by 25 basis points, beating expectations week; the Bank of Japan kept monetary policy steady and reiterated its commitment to defend its yield target by buying government bonds daily.

- JP: The Nikkei 225 rose 0.69% to close at 27,003. In comparison, the broader Topix index rose 0.93% to 1,916 on Friday after a three-day holiday, even as global stocks struggled amid fears that global central bank efforts to curb Aggressive tightening measures in response to expanding inflationary pressures could hurt growth and sell-off. On Thursday, investors also weighed comments from Japanese Prime Minister Fumio Kishida, who said Japan would further ease border controls in June, bringing it on par with other G7 nations. Index heavyweights rose strongly, including Toyota Motor (2.2%), Tokyo Electric (16.2%), Mitsubishi UFJ (3.1%), Mitsui & Co (6.1%) and Inpex (4.9%). Meanwhile, tech stocks tumbled overnight on Wall Street, with SoftBank Group (down 2.3%), Xining Holdings (down 2.2%), and Shenguang Electric (down 6.8%). The benchmark index edged higher in the holiday-shortened week.

 

 

 

STOCK MARKET SECTORS:

- High: Energy, Utilities.

- Low: Technology, Consumer Discretionary, Materials, Communication Services, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- USD: The U.S. dollar index fell back to around 103.4 on Friday, but not far from hitting a 20-year high above 104 earlier, as investors continued to bet on further monetary tightening by the Federal Reserve to control decades of high inflation. The U.S. central bank raised its benchmark overnight rate by 50 basis points on Wednesday, the most significant increase in 22 years, while Chairman Jerome Powell added that the central bank would not consider a 75 basis point hike. However, he assured Americans that the central bank would do everything to contain soaring inflation while acknowledging that it could cause economic pain. Meanwhile, the latest data showed that the U.S. economy added 428,000 jobs in April, beating expectations for an increase of 391,000 and marking the 12th consecutive month of over 400,000 jobs.

- CNY: The offshore yuan depreciated to 6.70 per dollar on Friday, its lowest level in 1-1/2 years, and extended April's heavy losses after China's top policy-making body warned against criticism of its controversial "dynamic zero" policy. . The zero-tolerance policy, which relies on draconian lockdowns and mass testing, has weighed heavily on the economy and increased the need for further easing. This is in stark contrast to other major economies, where the US aggressively raised interest rates to control inflation. Different monetary policies have also hurt China's yield advantage, with 10-year U.S. Treasury yields currently much higher than Chinese government bond yields.

- AUD: The Australian dollar fell above $0.71 on Friday, near a three-month low, reversing gains from earlier in the week as global markets tumbled and money poured into the greenback. Investors continued to bet on further monetary tightening by the Federal Reserve to rein in decades of high inflation, weighing on risk assets and pushing the dollar higher. Despite the Reserve Bank of Australia's unexpectedly hawkish turn, the Australian dollar has also fallen. On May 3, the Reserve Bank of Australia started the rate hike cycle with a higher-than-expected 25 basis point rate hike. On Friday, the RBA also sharply raised its core inflation forecast, which, even assuming a series of rate hikes, would not return to the 2-3 percent target range until 2024. Markets are pricing another 25 percentage point hike to 0.6% in June and nearly 3% each month by the end of the year.

- NZD: Funds returned to the greenback as global markets tumbled, with the New Zealand dollar holding around $0.64 on Friday, hovering at its lowest level in nearly two years, reversing gains from earlier in the week. Investors continued to bet on further monetary tightening by the Federal Reserve to rein in decades of high inflation, weighing on risk assets and pushing the dollar higher. Meanwhile, the Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points to 1.5% in April. Premier Adrian Orr then said RNZ was focused on containing inflation expectations and expected more rate hikes in the coming quarters. He added that if the central bank raises rates too slowly, inflation expectations could deviate from rates.

 

CHART OF THE DAY:

The U.S. dollar strengthened as robust U.S. labor market data increased expectations for further monetary tightening by the Federal Reserve. The Canadian dollar fell to 1.28 against the greenback, near a five-month low of 1.29. The Bank of Canada is also expected to continue its hawkish stance as its unemployment rate hit a record low of 5.2 percent in April. Bank of China Governor Macklem said the central bank is prepared to raise interest rates "if necessary" ahead of schedule "to curb consumer price increases. In March, annual inflation rose faster than expected, reaching a 31-year high of 6.7%. The Bank of Canada has raised its overnight rate target by 125 basis points to 1% this year and said it would rise further as the economy entered excess demand and inflation continued to run well above target. - USDCAD - D1, Resistance (target zone) around ~ 1.33363 & 1.3600, Support (target zone) around  ~ 1.26459 & 1.24500

 

Stock volatile finish to the first week of May, Crude oil keeps rising

GLOBAL CAPITAL MARKETS OVERVIEW:  

U.S. stocks closed lower for a second straight session on Friday. Still, they remained off session lows as investors continued to assess the impact of tightening global monetary policy against a backdrop of high inflation and a challenging growth outlook. However, a better-than-expected jobs report supported expectations that higher interest rates have so far not slowed job creation. Nonfarm payrolls rose by 428,000, while average hourly earnings rose slightly. On the earnings front, Under Armor tumbled on disappointing guidance from the apparel company. Live Nation Entertainment also slipped after first-quarter revenue fell short of Wall Street expectations. The Dow Jones Industrial Average fell less than 100 points, rebounding after falling more than 450 points earlier; the S&P 500 lost 0.6%, and the Nasdaq lost 1.4%. All three major indexes fell for a fifth straight week, the longest losing streak for the S&P since June 2011 and the longest losing streak for the Nasdaq since November 2012.The TSX S&P/TSX Composite fell 0.3% to 20,633 on Friday, extending the previous session's 2.3% loss to its lowest level since Jan. 27. The decline was most pronounced in the tech sector, as higher interest rates could hurt the valuations of these companies, especially as their profits rise further in the future. The Bank of Canada will continue its hawkish stance as Canada's unemployment rate hit a record low of 5.2 percent in April. Bank of China Governor Macklem said the central bank was prepared to raise interest rates sharply "if necessary" to curb rising consumer prices. Shopify and Ballard Power Systems were the biggest laggards in the index, down 8% and 7%. For the week, the index fell 0.6%. Major European stock indexes fell sharply on Friday, with the sell-off on Wall Street also intensifying, with Germany's DAX and the pan-European Stoxx 600 both down 1.6 percent to eight-week lows. Investors are concerned that inflation has become increasingly difficult to resolve after upbeat U.S. jobs data reinforced the view that the Federal Reserve may become more hawkish in response to soaring exit costs. Most sectors closed in negative territory, with retail stocks leading losses, while oil and gas companies bucked the trend and gained 0.7%. ING's profit disappointed in earnings season, while Adidas' operating profit beat estimates, as the sportswear company now sees full-year revenue at the low end of its outlook range. The DAX fell 3.4% on the week, and the Stoxx 600 lost 4.3%. On Friday, the FTSE MIB index fell 1.2% to close at 23,476, closing the week down 3.2% as investors focused on corporate earnings, fears of rising inflation, and expectations of tighter monetary policy. Financials were the biggest losers, with Italy's biggest lender Intesa Sanpaolo down 2.3% after cutting profit guidance due to its exposure to Russia. UniCredit fell 4%, also hurt by Russia exposure. Moncler, meanwhile, fell 4.2 percent, posting a sharp drop for the second straight session after the luxury brand said it could only beat analysts' revenue estimates if China's economy goes unrestricted by July. On the other hand, Leonardo closed higher after posting a net profit of 74 million euros in the first quarter of the year, compared with a loss of 2 million euros a year earlier. the CAC 40 index fell 1.7%, or 110 points, to close at 6,258, extending its third straight session of losses as fears of aggressive tightening roiled global markets. Domestically, strong downward pressure came from luxury stocks Kering (down 2.8%), Louis Vuitton (down 2.1%), Hermès (down 3.2%), and technology stocks Capgemini (down 3.0%) and Dassault Systèmes (down 4.8%). On the earnings front, AXA fell 1.5% after revenue rose 2% in the first quarter, and its 2023 outlook remained unchanged. For the week, the index fell 4.6%. The FTSE 100 fell 1.8% to 7,371, its lowest since March 16. As earnings season continues, global markets have seen bear market sentiment amid stagflation concerns and pressure from tightening monetary policy. Shares in IAG, owner of British Airways, tumbled nearly 8% after the company reported a worse-than-expected operating loss of 787 million euros in the first quarter of 2022. Still, as it plans to cut flights, Arrangements were raised to 80% of pre-pandemic levels, and the company expects to return to profitability in the June quarter. Meanwhile, hotel operator InterContinental said travel demand grew in almost all of its major markets, driven by a recovery in leisure, business, and group travel. A month later, ad agency S4's annual results showed revenue doubled for 2021, although EBIT turned to a loss of £56m from £3m the year before. On a weekly basis, the index would be down more than 2%. For the week, the London index fell 1.8%.The MOEX-Russia Index fell 0.5% to close at 2,383 on Friday, ending a brief 2.5% drop for the week as more sanctions loomed and the Russian economy could continue to contract. The European Commission proposed changes to the sixth set of sanctions announced on Wednesday to allow more time for countries dependent on Russian oil to phase out imports, bolstering expectations that the embargo will come. Financials were the hardest hit, with Sydney's Veolia down 1.6%, the Russian Federal Reserve down 1.4%, and energy giant Lukoil down 0.9%. However, selling pressure from the sanctions has been relatively limited because Russian markets are artificially supported by capital controls, including a ban on short-selling stocks and foreigners from selling Russian shares. MOEX will be closed on Mondays and Tuesdays to celebrate Victory Day.Hong Kong stocks tumbled for a third straight session, with the benchmark Hang Seng Index down nearly 4 percent to close at about 20,000, its worst week since late February. Defensive sectors such as consumer staples and health care sold off heavily, a sign of growing concern among investors about economic growth due to high inflation and aggressive monetary policy tightening. At home, the Hong Kong Monetary Authority on Thursday raised its benchmark interest rate by 50 basis points to 1.25%, amid growing fears that the local currency will weaken further due to capital outflows. In terms of economic data, retail sales in Hong Kong fell 16.8% year on year in March, the second consecutive month of decline. China Resources Beer Holdings and Country Garden Services Holdings were the biggest laggards in the index, down about 10% each. On Friday, the Shanghai Composite fell 2.16 percent to 3,002 points. The Shenzhen stock market fell 2.14 percent to 10,810 points, ending several days of strong gains after China's top policy-making body warned against criticism of its controversial "Dynamic Zero Covid-19" policy. The zero-tolerance approach, which relies on draconian lockdowns and mass testing, has severely impacted the economy and disrupted supply chains vital to international trade. Chinese stocks also tracked a slump in global equities amid concerns that aggressive tightening by central banks around the world to rein in expanding inflationary pressures could hurt economic growth. All sectors on the mainland fell, led by heavyweight technology, materials, and consumer stocks. Hangzhou Hikvision (down 9%), Oriental Currency (down 3.9%), CNOOC (down 3.2%), Zijin Mining (down 7.1%), Kweichow Moutai (down 2.4%), and China Tourism (down 8.9%) suffered substantial losses. The benchmark index fell for a fifth straight week. New Zealand S&P/NZX index fell 138.22 points, or 1/18%, to settle at 11,609.38 on Friday, its lowest close since mid-August 2020, and was down 2.3% for the week, tracking Wall Street's overnight slump as people grew increasingly. There are growing concerns that aggressive tightening policies to curb inflation worldwide could dampen the global post-pandemic recovery. Locally, consumer prices in New Zealand rose 12.19% year-on-year in the first quarter, the highest level in more than 30 years, and the Reserve Bank of New Zealand recently said it would maintain inflation expectations to prevent further rises. Traders were also nervous as Beijing stepped up its zero-coronavirus policy. Reuters quoted state television as saying China would oppose any remarks and actions that distort, doubt, or deny China's response to the outbreak. The biggest decliners were New Zealand Oil & Gas Ltd (7.2%), Solution Dynamics Ltd (6.4%), and Rua Bioscience Ltd (5.1%). Australia S&P/ASX 200 index fell 2.16% on Friday to close at 7,206, its lowest level in more than a month, amid concerns over aggressive moves by central banks around the world to curb mounting inflationary pressures. Austerity measures could hurt economic growth. Investors also digested the latest monetary policy statement from the Reserve Bank of Australia. Inflation is likely to exceed expectations this year. The statement said that the bank would need to raise interest rates further as unemployment is expected to fall to its lowest level since 1974. Technology stocks led losses, with Xero Ltd (-9.1%), Wisetech Global (-5.6%), Seek Ltd (-6.6%) and NextDC (-5.4%) down sharply. All other sectors participated in the sell-off, with sectors related to materials, financials, healthcare, and clean energy suffering heavy losses. Meanwhile, after a bumper year, Macquarie Group shares fell 7.8% after being warned of a slowdown in its commodities trading and capital businesses. The benchmark index fell 3.1% for the week.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CN: In April 2022, China's foreign exchange reserves fell for the fourth consecutive month to $3.120 trillion, the lowest. These figures compare to market forecasts of $3.133 trillion. Gold reserves stood at 62.64 million ounces at the end of April, unchanged from the end of March. The value of China's gold reserves fell from $121.66 billion at the end of March to $119.73 billion at the end of April.

- US: U.S. consumer credit rose by $52.43 billion in March 2022, up from a downwardly revised $37.7 billion last month and above consensus expectations for a $25 billion increase. It was the most significant monthly increase in consumer credit since December 2010, with non-revolving recognition increasing by $21.07 billion while revolving credit increased by $31.37 billion. Consumer credit grew at a 14% annual rate after a 10.2% downward revision in February.

- US: The U.S. unemployment rate remained unchanged at 3.6% in April 2022, the lowest level since February 2020, compared with market expectations of 3.5%. The number of unemployed was 5.941 million, a decrease of 11,000, and the employment level was 158.105 million, a decrease of 353,000. Meanwhile, the labor force participation rate fell to 62.2% in April from 62.4% in March.

- US: Average hourly earnings for all employees in U.S. private nonfarm payrolls rose 10 cents, or 0.3%, to $31.85 in April 2022, after increasing 0.5% in March and missing consensus estimates of 0.4%. Average hourly earnings for private-sector production and non-supervisory workers rose 10 cents, or 0.4%, to $27.12. Average hourly earnings rose 5.5% over the past 12 months, compared with a 5.6% increase in March.

- US: The U.S. economy added 428,000 jobs in April 2022, the same as the downwardly revised 428,000 jobs in March and above the forecast of 391,000 jobs. That marked the 12th straight month that employment topped 400,000 but fell from 7.14 million in February amid an increasingly tight labor market. Employment increased in all industries, with the most significant increase in leisure and hospitality (78K), namely restaurants (44K) and lodging (2200); manufacturing (55K), mainly durable goods (31K); As well as shipping and warehouse (52K). Still, China's economy is more robust than before the pandemic, as leisure and hospitality (£1.44m), local government (£596,000), and education and health services (£40,900) remain well below March 2020 levels Levels fell by £1.2 million. Economists believe the labor market could soon start to slow as the economy nears full employment, which will provide some relief from the heat of wage growth at a time when inflation reaches levels not seen since 1981.

- CA: Canada's Ivey PMI fell to 66.3 in April 2022 from 74.2 the previous month, a 16-year high. In April, supplier delivery times increased significantly (from 34.8 in March to 37.8), and business inventories grew slower (65.1 to 64.1). Meanwhile, employers have stepped up staffing efforts, employment has increased faster (65.1 from 62.5), while inflation accelerated to its highest level in three months (90.2 from 89.6).

- CA: The Canadian economy added 15.3 million jobs in April 2022, after adding 75,000 jobs in March, well below the consensus forecast of 55,000. In addition to an increase of 471,000 part-time jobs, the involuntary part-time employment rate fell to a record low of 15.7% but was almost offset by a decline of 316,000 full-time jobs. Employment increased in the service-producing sector (314K), mainly in public administration and professional, scientific, and technical services, but decreased in the goods-producing sector (-16K), mainly in construction. Across Canada, employment rose more sharply in the Atlantic region and Alberta but declined in Quebec.

- UK: The S&P Global/CIPS UK Construction PMI fell to a three-month low of 58.2 in April 2022 from 59.1 in March but still showed strong growth in the construction sector. According to reports, new orders rose at their weakest pace in four months due to rising raw material prices and, in some cases, indecision due to rising borrowing costs and geopolitical uncertainty. Meanwhile, supply chain delays are due to shortages of personnel, materials, and transportation, exacerbated by port delays and the war in Ukraine. Average costs have also risen sharply due to higher energy, fuel, and raw material costs. On the other hand, job growth was highest in three months. Meanwhile, growth forecasts fell to their lowest level since September 2020.

- TW: Taiwan's annual inflation rate rose to 3.38% in April 2022 from 3.27% in the previous month, beating market expectations of 3.25%. This was the highest inflation rate since August 2012, with both food prices (6.91% vs. 5.90% in March) and housing prices (1.78% vs. 1.55%) recovering. The upward pressure on the transport and communications sector was also high but eased slightly this month (5.01% vs. 5.92%). Meanwhile, core inflation accelerated to 2.53% from 2.47% in March. The consumer price index rose 0.39% on a seasonally adjusted monthly basis, down from an upwardly revised 0.80%.

- SW: Total orders received by the Swedish industry rose 6.5% year-on-year in March 2022, a sharp acceleration from February's downwardly revised 1.1% increase. Orders from overseas customers increased by 8.2%, and orders from Swedish customers increased by 4.0%. Seasonally adjusted monthly orders rose 3.9%, boosted by demand in the manufacture of fabricated metal products, excluding machinery and equipment (8.3%).

- SW: In March 2022, Swedish industrial output rose by 0.8% year-on-year, down from a downwardly revised 1.4% in the previous month. This was the third straight month of growth in industrial production, but the change was the weakest as manufacturing output growth slowed (0.7% in February vs. 1.6% in February). Meanwhile, mining and quarrying production rebounded sharply (7.0% vs. -2.5%). Industrial production rose 0.4% on a seasonally adjusted monthly basis, up from a revised 0.2% drop in February.

- RU: In April 2022, the S&P Global Russia Services PMI rose to 44.5 from a 22-month low of 38.1 in March. The services sector shrank for a second straight month, the latest data showed, with output and new orders both contracting as sanctions reduced customers' purchasing power. Meanwhile, new export orders fell for the second time in many months, the strongest since May 2020, aside from a low in March. Meanwhile, the employment rate fell to its second-highest level since October 2020. Despite the low employment rate, the backlog of jobs fell at the fastest pace since May 2020. On the price front, input cost inflation accelerated to the second-highest level. As a result, output cost inflation accelerated to the second-fastest pace since October 2001. Finally, businesses remain pessimistic about inflationary pressures and further declines in employment amid cost-cutting efforts.

- RU: The S&P Global Russia Composite PMI climbed to 44.4 in April 2022 from a 22-month low of 37.7 in March, with declines in both manufacturing and services easing. Still, the latest figures show private sector activity contracting at the second-fastest pace since the early days of the pandemic in May 2020, new orders hiring again, while employment has fallen steadily. At the same time, manufacturers' backlogs declined more slowly, while service providers declined more rapidly. Despite easing from the most recent peak in March, inflation in input prices and output costs was the fastest as sanctions pushed up imported input prices. Companies are also trying to pass the higher costs on to customers.

 

LOOKING AHEAD:   

Today, investors will receive:

- USD: Final Wholesale Inventories m/m, and Loan Officer Survey.

- JPY: Average Cash Earnings y/y, and Monetary Policy Meeting Minutes.

- CNY: Trade Balance, and USD-Denominated Trade Balance.

- EUR: French Trade Balance and Sentix Investor Confidence.

- CAD: Building Permits m/m.

- GBP: MPC Member Saunders Speaks.

 

KEY EQUITY & BOND MARKET DRIVERS:

- CA: Canada's 10-year government bond yield moved in line with U.S. Treasuries at 3.09%, the highest in more than a decade, as both countries experienced historical labor market tightening, further strengthening the Bank of Canada's The rationale for more aggressive tightening by U.S. counterparts. In April, Canada's unemployment rate increased to 5.2%, while the U.S. economy added 428K jobs. Both economies face decades of high inflation. Bank of China Governor Macklem said the central bank could raise interest rates sharply "if necessary" to counter rising prices, as the overnight rate target has been submitted by 125 basis points so far this year to 1%.

- US: The yield on the 10-year U.S. Treasury note, which sets the tone for global corporate and household borrowing costs, topped 3.1%, its highest level since November 2018, as the Federal Reserve's tightening cycle pushed rates higher at the Federal Open Market Committee (FOMC). It was in full swing after 50 basis points, while investors also digested upbeat employment data. The U.S. economy added 428,000 jobs in April, the same as the downwardly revised payrolls in March and about 40,000 more than market forecasts, leading analysts to believe that a hawkish Fed is. On Wednesday, Chairman Powell hit back on bets on a more aggressive 75 basis-point rate hike. Still, expectations for more aggressive tightening persist as inflation hits a 40-year high and the economy recovers.

- US: U.S. stock futures, which track the broader market, pared early losses and moved into positive territory for the time being after the jobs report after negative sentiment around the impact of tightening global monetary policy regained control on Wall Street. Investors reacted to a better-than-expected jobs report showing that higher interest rates are not slowing job creation. The Labor Department's closely watched employment report showed nonfarm payrolls rose by 428K, while average hourly earnings rose slightly more slowly. However, investors are cautious about economic growth, supported by runaway inflation and aggressive monetary tightening. In regular trading on Thursday, the Dow Jones Industrial Average fell more than 1,000 points, and the tech-heavy Nasdaq Composite tumbled nearly 5%, with both indexes posting their worst one-day losses since 2020. The S&P 500 also fell 3.6% on its second-worst day of 2022.

- GE: Germany's 10-year bond yield rose above 1 percent to its highest level since 2014, as worries about rising inflation and expectations of tighter monetary policy amplified bond selling in Europe. Preliminary data showed that inflation in the eurozone hit a record 7.5 percent in April, while domestic data was the highest since 1981. European Central Bank policymakers signaled that asset purchases could end as early as July, a condition for raising interest rates. Meanwhile, a new round of EU sanctions restricting Russian oil will likely prolong the surge in energy prices underlying rising inflation figures. The Fed raised its benchmark interest rate by 50 basis points at its May meeting, the most significant increase since 2000.

- JP: The yield on the benchmark 10-year Japanese government bond rebounded sharply to a six-year high of 0.257% on Friday, surpassing the Bank of Japan's target ceiling of 0.25% at the end of a busy week for interest rate decisions. The Federal Reserve and Bank of England hiked their respective rates to 1%. At the same time, last week, the Reserve Bank of Australia raised its key rate by 25 basis points, beating expectations to 0.35%, as warnings of double-digit inflation reverberated overseas. In Japan, the reality contrasted sharply as the latest inflation gauge rose to a more than three-year high of 1.2 percent. Last week, the Reserve Bank of Australia raised its key rate by 25 basis points, beating expectations week; the Bank of Japan kept monetary policy steady and reiterated its commitment to defend its yield target by buying government bonds daily.

- JP: The Nikkei 225 rose 0.69% to close at 27,003. In comparison, the broader Topix index rose 0.93% to 1,916 on Friday after a three-day holiday, even as global stocks struggled amid fears that global central bank efforts to curb Aggressive tightening measures in response to expanding inflationary pressures could hurt growth and sell-off. On Thursday, investors also weighed comments from Japanese Prime Minister Fumio Kishida, who said Japan would further ease border controls in June, bringing it on par with other G7 nations. Index heavyweights rose strongly, including Toyota Motor (2.2%), Tokyo Electric (16.2%), Mitsubishi UFJ (3.1%), Mitsui & Co (6.1%) and Inpex (4.9%). Meanwhile, tech stocks tumbled overnight on Wall Street, with SoftBank Group (down 2.3%), Xining Holdings (down 2.2%), and Shenguang Electric (down 6.8%). The benchmark index edged higher in the holiday-shortened week.

 

 

 

STOCK MARKET SECTORS:

- High: Energy, Utilities.

- Low: Technology, Consumer Discretionary, Materials, Communication Services, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

- USD: The U.S. dollar index fell back to around 103.4 on Friday, but not far from hitting a 20-year high above 104 earlier, as investors continued to bet on further monetary tightening by the Federal Reserve to control decades of high inflation. The U.S. central bank raised its benchmark overnight rate by 50 basis points on Wednesday, the most significant increase in 22 years, while Chairman Jerome Powell added that the central bank would not consider a 75 basis point hike. However, he assured Americans that the central bank would do everything to contain soaring inflation while acknowledging that it could cause economic pain. Meanwhile, the latest data showed that the U.S. economy added 428,000 jobs in April, beating expectations for an increase of 391,000 and marking the 12th consecutive month of over 400,000 jobs.

- CNY: The offshore yuan depreciated to 6.70 per dollar on Friday, its lowest level in 1-1/2 years, and extended April's heavy losses after China's top policy-making body warned against criticism of its controversial "dynamic zero" policy. . The zero-tolerance policy, which relies on draconian lockdowns and mass testing, has weighed heavily on the economy and increased the need for further easing. This is in stark contrast to other major economies, where the US aggressively raised interest rates to control inflation. Different monetary policies have also hurt China's yield advantage, with 10-year U.S. Treasury yields currently much higher than Chinese government bond yields.

- AUD: The Australian dollar fell above $0.71 on Friday, near a three-month low, reversing gains from earlier in the week as global markets tumbled and money poured into the greenback. Investors continued to bet on further monetary tightening by the Federal Reserve to rein in decades of high inflation, weighing on risk assets and pushing the dollar higher. Despite the Reserve Bank of Australia's unexpectedly hawkish turn, the Australian dollar has also fallen. On May 3, the Reserve Bank of Australia started the rate hike cycle with a higher-than-expected 25 basis point rate hike. On Friday, the RBA also sharply raised its core inflation forecast, which, even assuming a series of rate hikes, would not return to the 2-3 percent target range until 2024. Markets are pricing another 25 percentage point hike to 0.6% in June and nearly 3% each month by the end of the year.

- NZD: Funds returned to the greenback as global markets tumbled, with the New Zealand dollar holding around $0.64 on Friday, hovering at its lowest level in nearly two years, reversing gains from earlier in the week. Investors continued to bet on further monetary tightening by the Federal Reserve to rein in decades of high inflation, weighing on risk assets and pushing the dollar higher. Meanwhile, the Reserve Bank of New Zealand raised its benchmark interest rate by 50 basis points to 1.5% in April. Premier Adrian Orr then said RNZ was focused on containing inflation expectations and expected more rate hikes in the coming quarters. He added that if the central bank raises rates too slowly, inflation expectations could deviate from rates.

 

CHART OF THE DAY:

The U.S. dollar strengthened as robust U.S. labor market data increased expectations for further monetary tightening by the Federal Reserve. The Canadian dollar fell to 1.28 against the greenback, near a five-month low of 1.29. The Bank of Canada is also expected to continue its hawkish stance as its unemployment rate hit a record low of 5.2 percent in April. Bank of China Governor Macklem said the central bank is prepared to raise interest rates "if necessary" ahead of schedule "to curb consumer price increases. In March, annual inflation rose faster than expected, reaching a 31-year high of 6.7%. The Bank of Canada has raised its overnight rate target by 125 basis points to 1% this year and said it would rise further as the economy entered excess demand and inflation continued to run well above target. - USDCAD - D1, Resistance (target zone) around ~ 1.33363 & 1.3600, Support (target zone) around  ~ 1.26459 & 1.24500

 

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