GLOBAL CAPITAL MARKETS OVERVIEW:

European shares ended mixed on Monday after posting their first weekly gains in five years, with Germany's DAX, France's CAC, and Italy's FTSE MIB all below flat lines, while London's FTSE 100 and Spain's IBEX all rose. Investors are starting to worry that a recession may be imminent after economic activity in China cooled in April due to coronavirus restrictions and higher interest rates by major central banks. Travel and leisure stocks were the worst performers after Ryanair said its target profit for the financial year was reasonable and fare levels were lower than the company expected. On the other hand, telcos outperformed Vodafone after Emirates Telecommunications Group bought a 9.8% stake in Vodafone. At the same time, the European Commission cut its growth forecast for the eurozone to 2.7% this year from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB2 %The goal. The FTSE MIB index edged down to 24,034 on Monday, opening the week flat after gaining 2.5% in the previous week as global recession fears offset gains in the energy and utility sectors. The European Union cut its 2022 growth forecast for the eurozone to 2.7 percent from 4 percent and raised its year-end inflation forecast to 6.1 percent from 3.5 percent, mainly because of the fallout from the war in Ukraine. The growth scare weighed the most on tech stocks, with Nexi down 4.7%. Weaker-than-expected industrial production and retail sales in China also weighed on Milan's luxury sector, with Ferrari down 3.5 percent and Montclair down 2.2 percent. Meanwhile, Septem rose 8.1%, and Tenaris rose more than 4%, led by the energy sector as EU countries continued to press Hungary to accept the flexible terms of its collective embargo on Russian oil. Meanwhile, Interpump Group shares rose 5.1% after the manufacturer's strong first-quarter results. The CAC 40 fell 0.23 percent to end at 6,347.77, reversing Friday's gains as investors assessed the outlook for inflation and interest rates and worried about slowing global growth after China reported disappointing economic data amid coronavirus restrictions. In addition, markets are cautious in tracking recent developments in the Eastern European region after Finland announced plans to join NATO. Technology stocks declined, especially Worldline SA (-2.2%) and STMicroelectronics (-1.94%). Elsewhere, Renault shares slipped slightly after confirming the sale of a 68 percent stake to the Russian state agency. The FTSE 100 rose 0.63 percent to close at 7,464.8 on Monday, boosted by healthcare and resources-related stocks, but gains were limited by slowing data on retail and factory activity in China. Among individual stocks, the biggest gainers included AstraZeneca and GlaxoSmithKline and oil majors such as Shell and BP. In addition, large miners such as Glencore and Antofagasta also rose on higher metal prices. Vodafone shares rose 1.9% after the telecoms group Emirates Group acquired a 9.8% stake in Vodafone. On the other hand, Ryanair fell 0.2% as it failed to give a future outlook due to uncertainty over Covid-19 and the war in Ukraine. Also, Greggs shares fell 0.5% after the company said cost pressures were building despite higher sales, while diploma prices fell 5.7% after the first-half results. The MOEX Russia Index rose 2.5 percent to close at 2,365 on Monday, rebounding from a 3.6 percent slump last week, as investors continued to focus on the progress of the sixth round of EU sanctions. Lukoil rose 3.3 percent even though its directors did not recommend paying a dividend for 2021, while Hungary blocked the EU's phasing out of Russian oil. Elsewhere, Gazprom rose 3.6% after the company reported that it had increased its tariffs on non-CIS countries (especially the CIS) despite Kremlin sanctions on major European gas distributors in the first half of May. China) exports. However, selling pressure from sanctions has been relatively limited, as Russian markets are artificially supported by capital controls, including a ban on foreigners from selling Russian stocks. On the data front, inflation in Russia climbed to a 20-year high of 17.8% in April, but the monthly gain was 1.6%, significantly slower than March's 7.6% rise. On Monday, U.S. stocks fluctuated between small losses and gains as investors struggled with the twin shocks of aggressive monetary tightening and escalating tensions between the West and Russia. The S&P 500 is currently on the brink of a bear market, while the Nasdaq Composite is nearly 30% below its all-time peak, as the threat of soaring inflation scares investors away from riskier assets. Meanwhile, market participants will be watching another batch of quarterly corporate results from Walmart, Target, and Home Depot. In other corporate news, shares of Spirit Airlines rose more than 12% after JetBlue announced a hostile takeover of Spirit Airlines. On Monday, the Shanghai Composite fell 0.34% to close at 3,074, and the Shenzhen Composite fell 0.6% to 11,093, giving back some of last week's gains after China's central bank maintained key policies amid a sharp economic slowdown. Interest rates remain unchanged. The People's Bank of China kept the one-year medium-term lending rate at 2.85% and the seven-day reverse repo rate at 2.1%, suggesting it is likely to maintain the benchmark lending prime rate this month. The decision comes after China released disappointing economic data amid coronavirus restrictions. Retail sales and industrial production data were well below expectations, while the country's unemployment rate climbed to a new high in April. Healthcare, consumer, technology, and financial stocks led to losses. Meanwhile, Shanghai has laid out plans to resume more normal life from June 1, after weeks of strict lockdown. On Monday, the Nikkei 225 rose 0.45% to close at 26,547, while the broader Topix lost 0.05% to end the session at 1,863 in a mixed session, with Japanese stocks tracking Wall Street's easy rebound on Friday, while a weaker Chinese economy The data weighed on sentiment. Global stock markets have been facing greater volatility amid concerns over rising interest rates, high inflation, and a global economic slowdown. Tech stocks were mostly higher, with SoftBank Group (1.4%), Murata Manufacturing (1.5%), Recruit Holdings (3%), Sumco Corp (2.8%), and NTT Data Corp (6.3%) solid gains. Consumer and service-related companies also rose, including Oriental Properties (4.2%), Xuefeng (8.4%), Japan Post (5%), and Persol Holdings (7.5%). Meanwhile, an economic slowdown in Japan's main trading partner weighed on sentiment as China's industrial production and retail sales contracted far more than expected. New Zealand S&P/NZX fell 10.52 points, or 0.1%, to settle at a near 22-month low of 11,157.66, its lowest close since June 21, 2020. The index extended losses from the previous week while tracking U.S. stock futures, which traded significantly lower, as market participants remained cautious about the prospect of a slowing global economy and rising global interest rates. Investors digested China's economic data for April, which missed expectations due to strict virus restrictions in parts of the country. Locally, Jacinda Ardern has tested positive for COVID-19 with mild symptoms, Prime Minister Jacinda Ardern's office said in a statement on Saturday. On the economic data front, New Zealand's services sector activity rose for the second consecutive month in April, although the data was little changed from the previous month. SMW Group Ltd fell 10%, while Reman Healthcare Ltd, Rua Biosciences Ltd, and Good Wine Hotel fell 7.8%, 4.6%, and 4.2%, respectively.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CA: Wholesale sales in Canada rebounded 0.3% month-over-month in March 2022 to C$79.8 billion, compared with a preliminary estimate of a 0.3% decline in February and a revised 0.4% decline. Growth was supported by higher sales of building materials and supplies (up 3.8%) and motor vehicles and motor vehicle accessories and parts (up 2.6%).

- CA: Canadian manufacturing sales rose 2.5% from the previous month to C$70.2 billion in March 2022, moderating from a 5.1% rise the previous month but beating a preliminary estimate of 1.7%. It was the sixth straight month of growth in manufacturing sales, with 16 of 21 industries showing gains. Oil and coal (9.1%) supported overall growth, with higher prices due to the Ukraine war offsetting lower volumes during the month and record direct metal sales (6.5%) driven by alumina and aluminum production and processing (47.9%) ). Sales also rose in the paper (9.3%) and chemicals (3.3%). Manufacturing sales rose 18.7% year over year.

- US: The Empire State Manufacturing Index unexpectedly fell to -11.6 in May 2022 from 24.6 in April, below the consensus forecast of 17. Business activity in New York State declined after solid gains last month, with fewer new orders (-8.8 vs. 25.1) and shipments falling at the fastest pace since the early days of the pandemic (-15.4 vs. 34.5). In addition, lead times continued to increase (20.2 to 21.8), and inventories increased (7.9 to 11.6). Labour market indicators showed slight increases in employment (14 versus 7.3) and average weekly hours worked (11.9 versus 10). The price paid index (73.7 to 86.4) and the price received index (45.6 to 49.1) fell but still rose. Looking ahead, optimism for the six-month outlook remains subdued (18 vs. 15.2).

- EU: The eurozone recorded a trade deficit of 16.4 billion euros in March, compared with a surplus of 22.5 billion euros a year earlier. The energy trade deficit nearly tripled to 128.7 billion euros in the first three months of the year, as the war in Ukraine exacerbated Europe's existing energy crisis, sending energy prices further up. Imports surged 35.4% to a record 266.5 billion euros, while exports rose 14% to 250.1 billion euros, also a record. The EU's trade deficit with Russia more than quadrupled to 45.2 billion euros in the first quarter, and its trade deficit with top trading partner China nearly doubled to 91.9 billion euros.

- EU: The European Commission lowered the EU's growth outlook and raised its inflation forecast as Russia's invasion of Ukraine put further upward pressure on commodity prices, leading to renewed supply disruptions and heightened uncertainty. Currently, real GDP growth in the EU and euro area is projected at 2.7% in 2022 and 2.3% in 2023, respectively, down from 4.0% and 2.8% in the mid-winter 2022 forecast (2.7% in the euro area). As a result, inflation in the euro area is expected to be 6.1% in 2022 (from 3.5% previously) before falling to 2.7% in 2023. Inflation is expected to peak at 6.9% in the second quarter of this year before gradually falling. For the EU, inflation is expected to rise from 2.9% in 2021 to 6.8% in 2022 and fall back to 3.2% in 2023. As a result, the EU and the euro area are expected to average core inflation of more than 3% in 2022 and 2023.

- NZ: In April 2022, the New Zealand Business Services Performance Index fell to 51.4 from a downwardly revised 51.5. Sales growth slowed (52.7 to 53.5 in March), and new orders (53.6 to 59). Meanwhile, employment levels improved (51.2 vs. 49.2). Additionally, inventory increased (54.8 to 52.8), while supplier deliveries decreased (40.1 to 40.5). Kirk Hope, chief executive of BusinessNZ, said: "While April's results remain positive, the volatile nature of some key sub-index values means that the trend towards continued expansion at traditional levels appears to be. However, there is still a long way to go.”

 

LOOKING AHEAD:   

Today, investors will receive:

-USD: FOMC Member Bullard Speaks, Core Retail Sales m/m, Retail Sales m/m, Capacity Utilization Rate, Industrial Production m/m, Business Inventories m/m, NAHB Housing Market Index, Fed Chair Powell Speaks, and FOMC Member Mester Speaks.

- EUR: Italian Trade Balance, Flash Employment Change q/q, Flash GDP q/q, and ECB President Lagarde Speaks.

- GBP: Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate, MPC Member Cunliffe Speaks, and 30-y Bond Auction.

- JPY: Tertiary Industry Activity m/m.

- NZD: GDT Price Index.

- AUD: Monetary Policy Meeting Minutes.

- CAD: Foreign Securities Purchases.

 

KEY EQUITY & BOND MARKET DRIVERS:

- JP: The yield on benchmark Japanese 10-year JGBs has been rising since March, settling at a pace of around 0.25%, near its highest level since 2016, and staying at the upper end of the BOJ’s tolerable trading range. Japanese government bond yields are tracking rising borrowing costs worldwide amid fears of slowing economic growth and expectations that the world's central banks, especially the Federal Reserve, will need to raise interest rates faster to rein in soaring inflationary pressures. By contrast, the Bank of Japan reiterated its ultra-easy monetary policy last month and pledged to defend its yield target by buying government bonds per day. As a result, the yen is hovering at 20-year lows, and the yield gap between Japan and the United States is widening.

- CN: Yields on China's 10-year government bond have hovered around 2.8% since mid-February, after hitting a two-year low of 2.67% in January, as investors weighed signs of an economic slowdown and the prospect of more aggressive Fed tightening. Partial or complete lockdowns in several cities, including Beijing and Shanghai, have severely hurt consumer spending and disrupted industrial production. In addition, several developers' ongoing property debt crisis and defaults, including Evergrande Group, have also added to concerns about an economic recovery, even as the People's Bank of China pledged continued support. At the same time, the Fed will tighten monetary policy more quickly, and the spread between the U.S. and Chinese government bond yields has narrowed, making it less attractive to buy riskier Chinese assets.

- EU: European futures opened the week cautiously, with major stock indexes opening lower and concerns over the global economic outlook intensified after retail sales and industrial production in China contracted due to coronavirus restrictions. Traders will also be watching developments in Ukraine, especially after Finland and Sweden announced plans to join NATO, which prompted Moscow to threaten to join NATO with consequences. In addition, the European Commission is to release new eurozone economic forecasts on the data front. Ryanair's earnings will also be in the spotlight.

- US: U.S. stock futures edged higher on Monday after another volatile week on Wall Street, as investors braced for a busy earnings week for retailers. Dow futures were up 0.4%, S&P 500 futures were up 0.5% and Nasdaq 100 futures were up 0.7%. On Friday, the major moving averages entered a moderating rebound mode, ending a bad week in which the S&P 500 nearly slipped into the bear market territory. The tech-heavy Nasdaq Composite fell 2.8% last week, while the S&P 500 and Dow Jones Industrial Average fell 2.41% and 2.14%. Analysts say there are good buying opportunities at current market lows while remaining cautious as the Fed is just beginning its rate hike cycle. Meanwhile, retail earnings season kicks off this week, with major companies including Walmart, Target, and Home Depot reporting first-quarter earnings. Investors are also awaiting retail sales data that could provide insight into how retailers respond to soaring inflation.

 

STOCK MARKET SECTORS:

- High: Energy, Health Care, Utilities, Consumer Staples.

- Low: Consumer Discretionary, Financials, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

-EUR: The euro changed hands around $1.04, just above a five-year low of $1.035 hit last week and still on the verge of hitting dollar parity for the first time in 20 years. Since February, the common currency has been under intense pressure as Russia's invasion of Ukraine deepened the energy crisis, fueled inflation, and slowed growth. As a result, the European Commission cut its growth forecast for the eurozone to 2.7% from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB's 2.0% target. Meanwhile, higher-than-expected U.S. inflation data raised expectations that the Federal Reserve will tighten monetary policy sooner than other major central banks. As a result, investors now expect the ECB to raise rates by 25 basis points in July and September and again at the end of the year, while the Federal Reserve has already raised rates twice for a cumulative 75 basis points.

- CNY: The offshore yuan weakened by more than 6.80 against the dollar, near its weakest level in 20 months, after China released disappointing economic data amid coronavirus-related restrictions. Retail sales and industrial production data were well below expectations, while the country's unemployment rate climbed to a new high in April. Meanwhile, China's central bank kept its key policy rate unchanged despite a sharp economic slowdown. The People's Bank of China kept the one-year medium-term lending rate at 2.85% and the seven-day reverse repo rate at 2.1%, suggesting it is likely to maintain the benchmark lending prime rate this month. Since mid-April, the yuan has been under pressure on bets that the People's Bank of China will have to ease monetary policy further to support a slowing economy, while the Federal Reserve is aggressively raising interest rates to curb soaring inflation.

 

CHART OF THE DAY:

European shares ended mixed on Monday after posting their first weekly gains in five years, with Germany's DAX, France's CAC, and Italy's FTSE MIB all below flat lines, while London's FTSE 100 and Spain's IBEX all rose. Investors are starting to worry that a recession may be imminent after economic activity in China cooled in April due to coronavirus restrictions and higher interest rates by major central banks. Travel and leisure stocks were the worst performers after Ryanair said its target profit for the financial year was reasonable and fare levels were lower than the company expected. On the other hand, telcos outperformed Vodafone after Emirates Telecommunications Group bought a 9.8% stake in Vodafone. At the same time, the European Commission cut its growth forecast for the eurozone to 2.7% this year from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB2 %The goal. - German DAX index - D1, Resistance around ~ 14 908, Support (target zone) around ~ 13 481.

 

Weakness in the growth stocks

GLOBAL CAPITAL MARKETS OVERVIEW:

European shares ended mixed on Monday after posting their first weekly gains in five years, with Germany's DAX, France's CAC, and Italy's FTSE MIB all below flat lines, while London's FTSE 100 and Spain's IBEX all rose. Investors are starting to worry that a recession may be imminent after economic activity in China cooled in April due to coronavirus restrictions and higher interest rates by major central banks. Travel and leisure stocks were the worst performers after Ryanair said its target profit for the financial year was reasonable and fare levels were lower than the company expected. On the other hand, telcos outperformed Vodafone after Emirates Telecommunications Group bought a 9.8% stake in Vodafone. At the same time, the European Commission cut its growth forecast for the eurozone to 2.7% this year from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB2 %The goal. The FTSE MIB index edged down to 24,034 on Monday, opening the week flat after gaining 2.5% in the previous week as global recession fears offset gains in the energy and utility sectors. The European Union cut its 2022 growth forecast for the eurozone to 2.7 percent from 4 percent and raised its year-end inflation forecast to 6.1 percent from 3.5 percent, mainly because of the fallout from the war in Ukraine. The growth scare weighed the most on tech stocks, with Nexi down 4.7%. Weaker-than-expected industrial production and retail sales in China also weighed on Milan's luxury sector, with Ferrari down 3.5 percent and Montclair down 2.2 percent. Meanwhile, Septem rose 8.1%, and Tenaris rose more than 4%, led by the energy sector as EU countries continued to press Hungary to accept the flexible terms of its collective embargo on Russian oil. Meanwhile, Interpump Group shares rose 5.1% after the manufacturer's strong first-quarter results. The CAC 40 fell 0.23 percent to end at 6,347.77, reversing Friday's gains as investors assessed the outlook for inflation and interest rates and worried about slowing global growth after China reported disappointing economic data amid coronavirus restrictions. In addition, markets are cautious in tracking recent developments in the Eastern European region after Finland announced plans to join NATO. Technology stocks declined, especially Worldline SA (-2.2%) and STMicroelectronics (-1.94%). Elsewhere, Renault shares slipped slightly after confirming the sale of a 68 percent stake to the Russian state agency. The FTSE 100 rose 0.63 percent to close at 7,464.8 on Monday, boosted by healthcare and resources-related stocks, but gains were limited by slowing data on retail and factory activity in China. Among individual stocks, the biggest gainers included AstraZeneca and GlaxoSmithKline and oil majors such as Shell and BP. In addition, large miners such as Glencore and Antofagasta also rose on higher metal prices. Vodafone shares rose 1.9% after the telecoms group Emirates Group acquired a 9.8% stake in Vodafone. On the other hand, Ryanair fell 0.2% as it failed to give a future outlook due to uncertainty over Covid-19 and the war in Ukraine. Also, Greggs shares fell 0.5% after the company said cost pressures were building despite higher sales, while diploma prices fell 5.7% after the first-half results. The MOEX Russia Index rose 2.5 percent to close at 2,365 on Monday, rebounding from a 3.6 percent slump last week, as investors continued to focus on the progress of the sixth round of EU sanctions. Lukoil rose 3.3 percent even though its directors did not recommend paying a dividend for 2021, while Hungary blocked the EU's phasing out of Russian oil. Elsewhere, Gazprom rose 3.6% after the company reported that it had increased its tariffs on non-CIS countries (especially the CIS) despite Kremlin sanctions on major European gas distributors in the first half of May. China) exports. However, selling pressure from sanctions has been relatively limited, as Russian markets are artificially supported by capital controls, including a ban on foreigners from selling Russian stocks. On the data front, inflation in Russia climbed to a 20-year high of 17.8% in April, but the monthly gain was 1.6%, significantly slower than March's 7.6% rise. On Monday, U.S. stocks fluctuated between small losses and gains as investors struggled with the twin shocks of aggressive monetary tightening and escalating tensions between the West and Russia. The S&P 500 is currently on the brink of a bear market, while the Nasdaq Composite is nearly 30% below its all-time peak, as the threat of soaring inflation scares investors away from riskier assets. Meanwhile, market participants will be watching another batch of quarterly corporate results from Walmart, Target, and Home Depot. In other corporate news, shares of Spirit Airlines rose more than 12% after JetBlue announced a hostile takeover of Spirit Airlines. On Monday, the Shanghai Composite fell 0.34% to close at 3,074, and the Shenzhen Composite fell 0.6% to 11,093, giving back some of last week's gains after China's central bank maintained key policies amid a sharp economic slowdown. Interest rates remain unchanged. The People's Bank of China kept the one-year medium-term lending rate at 2.85% and the seven-day reverse repo rate at 2.1%, suggesting it is likely to maintain the benchmark lending prime rate this month. The decision comes after China released disappointing economic data amid coronavirus restrictions. Retail sales and industrial production data were well below expectations, while the country's unemployment rate climbed to a new high in April. Healthcare, consumer, technology, and financial stocks led to losses. Meanwhile, Shanghai has laid out plans to resume more normal life from June 1, after weeks of strict lockdown. On Monday, the Nikkei 225 rose 0.45% to close at 26,547, while the broader Topix lost 0.05% to end the session at 1,863 in a mixed session, with Japanese stocks tracking Wall Street's easy rebound on Friday, while a weaker Chinese economy The data weighed on sentiment. Global stock markets have been facing greater volatility amid concerns over rising interest rates, high inflation, and a global economic slowdown. Tech stocks were mostly higher, with SoftBank Group (1.4%), Murata Manufacturing (1.5%), Recruit Holdings (3%), Sumco Corp (2.8%), and NTT Data Corp (6.3%) solid gains. Consumer and service-related companies also rose, including Oriental Properties (4.2%), Xuefeng (8.4%), Japan Post (5%), and Persol Holdings (7.5%). Meanwhile, an economic slowdown in Japan's main trading partner weighed on sentiment as China's industrial production and retail sales contracted far more than expected. New Zealand S&P/NZX fell 10.52 points, or 0.1%, to settle at a near 22-month low of 11,157.66, its lowest close since June 21, 2020. The index extended losses from the previous week while tracking U.S. stock futures, which traded significantly lower, as market participants remained cautious about the prospect of a slowing global economy and rising global interest rates. Investors digested China's economic data for April, which missed expectations due to strict virus restrictions in parts of the country. Locally, Jacinda Ardern has tested positive for COVID-19 with mild symptoms, Prime Minister Jacinda Ardern's office said in a statement on Saturday. On the economic data front, New Zealand's services sector activity rose for the second consecutive month in April, although the data was little changed from the previous month. SMW Group Ltd fell 10%, while Reman Healthcare Ltd, Rua Biosciences Ltd, and Good Wine Hotel fell 7.8%, 4.6%, and 4.2%, respectively.

 

REVIEWING ECONOMIC DATA: 

Looking at the last economic data:

- CA: Wholesale sales in Canada rebounded 0.3% month-over-month in March 2022 to C$79.8 billion, compared with a preliminary estimate of a 0.3% decline in February and a revised 0.4% decline. Growth was supported by higher sales of building materials and supplies (up 3.8%) and motor vehicles and motor vehicle accessories and parts (up 2.6%).

- CA: Canadian manufacturing sales rose 2.5% from the previous month to C$70.2 billion in March 2022, moderating from a 5.1% rise the previous month but beating a preliminary estimate of 1.7%. It was the sixth straight month of growth in manufacturing sales, with 16 of 21 industries showing gains. Oil and coal (9.1%) supported overall growth, with higher prices due to the Ukraine war offsetting lower volumes during the month and record direct metal sales (6.5%) driven by alumina and aluminum production and processing (47.9%) ). Sales also rose in the paper (9.3%) and chemicals (3.3%). Manufacturing sales rose 18.7% year over year.

- US: The Empire State Manufacturing Index unexpectedly fell to -11.6 in May 2022 from 24.6 in April, below the consensus forecast of 17. Business activity in New York State declined after solid gains last month, with fewer new orders (-8.8 vs. 25.1) and shipments falling at the fastest pace since the early days of the pandemic (-15.4 vs. 34.5). In addition, lead times continued to increase (20.2 to 21.8), and inventories increased (7.9 to 11.6). Labour market indicators showed slight increases in employment (14 versus 7.3) and average weekly hours worked (11.9 versus 10). The price paid index (73.7 to 86.4) and the price received index (45.6 to 49.1) fell but still rose. Looking ahead, optimism for the six-month outlook remains subdued (18 vs. 15.2).

- EU: The eurozone recorded a trade deficit of 16.4 billion euros in March, compared with a surplus of 22.5 billion euros a year earlier. The energy trade deficit nearly tripled to 128.7 billion euros in the first three months of the year, as the war in Ukraine exacerbated Europe's existing energy crisis, sending energy prices further up. Imports surged 35.4% to a record 266.5 billion euros, while exports rose 14% to 250.1 billion euros, also a record. The EU's trade deficit with Russia more than quadrupled to 45.2 billion euros in the first quarter, and its trade deficit with top trading partner China nearly doubled to 91.9 billion euros.

- EU: The European Commission lowered the EU's growth outlook and raised its inflation forecast as Russia's invasion of Ukraine put further upward pressure on commodity prices, leading to renewed supply disruptions and heightened uncertainty. Currently, real GDP growth in the EU and euro area is projected at 2.7% in 2022 and 2.3% in 2023, respectively, down from 4.0% and 2.8% in the mid-winter 2022 forecast (2.7% in the euro area). As a result, inflation in the euro area is expected to be 6.1% in 2022 (from 3.5% previously) before falling to 2.7% in 2023. Inflation is expected to peak at 6.9% in the second quarter of this year before gradually falling. For the EU, inflation is expected to rise from 2.9% in 2021 to 6.8% in 2022 and fall back to 3.2% in 2023. As a result, the EU and the euro area are expected to average core inflation of more than 3% in 2022 and 2023.

- NZ: In April 2022, the New Zealand Business Services Performance Index fell to 51.4 from a downwardly revised 51.5. Sales growth slowed (52.7 to 53.5 in March), and new orders (53.6 to 59). Meanwhile, employment levels improved (51.2 vs. 49.2). Additionally, inventory increased (54.8 to 52.8), while supplier deliveries decreased (40.1 to 40.5). Kirk Hope, chief executive of BusinessNZ, said: "While April's results remain positive, the volatile nature of some key sub-index values means that the trend towards continued expansion at traditional levels appears to be. However, there is still a long way to go.”

 

LOOKING AHEAD:   

Today, investors will receive:

-USD: FOMC Member Bullard Speaks, Core Retail Sales m/m, Retail Sales m/m, Capacity Utilization Rate, Industrial Production m/m, Business Inventories m/m, NAHB Housing Market Index, Fed Chair Powell Speaks, and FOMC Member Mester Speaks.

- EUR: Italian Trade Balance, Flash Employment Change q/q, Flash GDP q/q, and ECB President Lagarde Speaks.

- GBP: Average Earnings Index 3m/y, Claimant Count Change, Unemployment Rate, MPC Member Cunliffe Speaks, and 30-y Bond Auction.

- JPY: Tertiary Industry Activity m/m.

- NZD: GDT Price Index.

- AUD: Monetary Policy Meeting Minutes.

- CAD: Foreign Securities Purchases.

 

KEY EQUITY & BOND MARKET DRIVERS:

- JP: The yield on benchmark Japanese 10-year JGBs has been rising since March, settling at a pace of around 0.25%, near its highest level since 2016, and staying at the upper end of the BOJ’s tolerable trading range. Japanese government bond yields are tracking rising borrowing costs worldwide amid fears of slowing economic growth and expectations that the world's central banks, especially the Federal Reserve, will need to raise interest rates faster to rein in soaring inflationary pressures. By contrast, the Bank of Japan reiterated its ultra-easy monetary policy last month and pledged to defend its yield target by buying government bonds per day. As a result, the yen is hovering at 20-year lows, and the yield gap between Japan and the United States is widening.

- CN: Yields on China's 10-year government bond have hovered around 2.8% since mid-February, after hitting a two-year low of 2.67% in January, as investors weighed signs of an economic slowdown and the prospect of more aggressive Fed tightening. Partial or complete lockdowns in several cities, including Beijing and Shanghai, have severely hurt consumer spending and disrupted industrial production. In addition, several developers' ongoing property debt crisis and defaults, including Evergrande Group, have also added to concerns about an economic recovery, even as the People's Bank of China pledged continued support. At the same time, the Fed will tighten monetary policy more quickly, and the spread between the U.S. and Chinese government bond yields has narrowed, making it less attractive to buy riskier Chinese assets.

- EU: European futures opened the week cautiously, with major stock indexes opening lower and concerns over the global economic outlook intensified after retail sales and industrial production in China contracted due to coronavirus restrictions. Traders will also be watching developments in Ukraine, especially after Finland and Sweden announced plans to join NATO, which prompted Moscow to threaten to join NATO with consequences. In addition, the European Commission is to release new eurozone economic forecasts on the data front. Ryanair's earnings will also be in the spotlight.

- US: U.S. stock futures edged higher on Monday after another volatile week on Wall Street, as investors braced for a busy earnings week for retailers. Dow futures were up 0.4%, S&P 500 futures were up 0.5% and Nasdaq 100 futures were up 0.7%. On Friday, the major moving averages entered a moderating rebound mode, ending a bad week in which the S&P 500 nearly slipped into the bear market territory. The tech-heavy Nasdaq Composite fell 2.8% last week, while the S&P 500 and Dow Jones Industrial Average fell 2.41% and 2.14%. Analysts say there are good buying opportunities at current market lows while remaining cautious as the Fed is just beginning its rate hike cycle. Meanwhile, retail earnings season kicks off this week, with major companies including Walmart, Target, and Home Depot reporting first-quarter earnings. Investors are also awaiting retail sales data that could provide insight into how retailers respond to soaring inflation.

 

STOCK MARKET SECTORS:

- High: Energy, Health Care, Utilities, Consumer Staples.

- Low: Consumer Discretionary, Financials, Real Estate.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

-EUR: The euro changed hands around $1.04, just above a five-year low of $1.035 hit last week and still on the verge of hitting dollar parity for the first time in 20 years. Since February, the common currency has been under intense pressure as Russia's invasion of Ukraine deepened the energy crisis, fueled inflation, and slowed growth. As a result, the European Commission cut its growth forecast for the eurozone to 2.7% from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB's 2.0% target. Meanwhile, higher-than-expected U.S. inflation data raised expectations that the Federal Reserve will tighten monetary policy sooner than other major central banks. As a result, investors now expect the ECB to raise rates by 25 basis points in July and September and again at the end of the year, while the Federal Reserve has already raised rates twice for a cumulative 75 basis points.

- CNY: The offshore yuan weakened by more than 6.80 against the dollar, near its weakest level in 20 months, after China released disappointing economic data amid coronavirus-related restrictions. Retail sales and industrial production data were well below expectations, while the country's unemployment rate climbed to a new high in April. Meanwhile, China's central bank kept its key policy rate unchanged despite a sharp economic slowdown. The People's Bank of China kept the one-year medium-term lending rate at 2.85% and the seven-day reverse repo rate at 2.1%, suggesting it is likely to maintain the benchmark lending prime rate this month. Since mid-April, the yuan has been under pressure on bets that the People's Bank of China will have to ease monetary policy further to support a slowing economy, while the Federal Reserve is aggressively raising interest rates to curb soaring inflation.

 

CHART OF THE DAY:

European shares ended mixed on Monday after posting their first weekly gains in five years, with Germany's DAX, France's CAC, and Italy's FTSE MIB all below flat lines, while London's FTSE 100 and Spain's IBEX all rose. Investors are starting to worry that a recession may be imminent after economic activity in China cooled in April due to coronavirus restrictions and higher interest rates by major central banks. Travel and leisure stocks were the worst performers after Ryanair said its target profit for the financial year was reasonable and fare levels were lower than the company expected. On the other hand, telcos outperformed Vodafone after Emirates Telecommunications Group bought a 9.8% stake in Vodafone. At the same time, the European Commission cut its growth forecast for the eurozone to 2.7% this year from 4.0% in February and raised its inflation forecast to 2.7% in 2023 from 6.1% this year, well above the ECB2 %The goal. - German DAX index - D1, Resistance around ~ 14 908, Support (target zone) around ~ 13 481.

 

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