GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Dow closed more than 100 points lower on Friday, while the S&P 500 and Nasdaq fell 0.1% and 0.2%, respectively, as a pause in U.S. debt-limit talks spooked investors. Meanwhile, Fed Chairman Jerome Powell said inflation was well above target and the central bank was committed to bringing it back to its 2% target, but that rate hikes may not be necessary due to stress in the banking sector. Western Union and Pacific Western fell 2.4 percent and 1.9 percent, respectively, despite gains of more than 24 percent for the week. In corporate news, shares of Deere & Co. fell 1.9% after its earnings and revenue topped estimates. Shares of Foot Locker fell 27.1% after disappointing quarterly results. Conversely, Farfetch rose 14.7% after a surprise first-quarter revenue increase. For the week, the Dow rose 0.7%, the S&P 500 rose 1.8%, marking its best week since March, and the Nasdaq rose 3%, also its biggest weekly gain in two months.

The Canada S&P/TSX Composite edged up 0.2% on Friday to close around 20,350, its third straight session of gains, as higher commodity prices lifted shares of energy and mining companies. Meanwhile, Wall Street peers underperformed after Republican negotiators pulled out of a debt-ceiling meeting. Energy stocks rose 1.2 percent, mining stocks rose 0.8 percent, and shares in Wesdome Gold Mining rose 2.2 percent each. On the domestic data front, as expected, Canadian retail sales fell 1.4% month-on-month in March, suggesting consumers are struggling with the cost of living amid rising inflation and rising interest rates. In corporate news, Edenbrook Capital, which owns 10.4 percent of Absolute Software, said Crosspoint Capital Partners' deal to take the software company private significantly undervalued the company. Still, the benchmark fell 0.5% for the week, its fourth straight weekly decline.

Germany's DAX reached a record high of 16,275 points on Friday, while the Stoxx 600 rose 0.8% to its highest level in over a year, buoyed by optimism that the U.S. debt ceiling may be resolved. President Joe Biden and top Congressional Republican Kevin McCarthy said they were determined to reach a quick deal to raise the government's borrowing limit. At the closing session in Europe, however, there was some uncertainty as Republican negotiators reportedly pulled out of the debt ceiling meeting. Europe's ongoing corporate earnings season has been strong, with major companies continuing to beat expectations. On the economic data front, German producer price inflation slowed to its lowest level in more than two years, pointing to further easing of inflationary pressures in Europe's largest economy.The CAC 40 rose about 0.6 percent to close at a near one-month high of 7,492 on Friday, tracking gains by its European peers as investors remained optimistic that a resolution on the U.S. debt ceiling was imminent. Jerome Powell, the chairman of the Federal Reserve, made comments that improved sentiment by suggesting that tighter credit conditions could reduce pressure to raise interest rates in light of recent turmoil in the American financial system. Among individual stocks, the biggest gainers were Veolia Environnement (+2.1%), Stellantis NV (+1.9%), Saint-Gobain (+1.8%), and Sanofi (+1.4%). In contrast, Kering (-1.8%), EssilorLuxottica (-1.6%) and Thales (-0.8%) were the biggest losers. The CAC 40 gained about 1% for the week.FTSE MIB rose about 1.1% to close at a more than two-week high of 27,520, outperforming its European peers. The main support came from shares of Interpump Group (+4.4%), after the company announced the acquisition of a small milking products business in New Zealand, which is expected to strengthen its position in the food industry. Hera (+3.1%) and A2a (+2.3%) led the way for the utilities sector, which also performed well. Meanwhile, investors continued to focus on ongoing negotiations on the U.S. debt ceiling and digested a speech from Federal Reserve Chairman Jerome Powell that eased concerns about further rate hikes. Domestically, caution prevailed as ratings agency Moody's was due to release an update on Italy's sovereign rating later in the day. The FTSE MIB ended the week up around 0.6 percent.

The ruble-based MOEX Russia index edged lower on Friday after Britain announced a ban on Russian diamonds and restrictions on imports of Russian-origin copper, aluminum, and nickel. In 2021, the export value of Russian diamonds will be 4 billion US dollars. In addition, the government introduced new individual titles targeting 86 people and companies related to Russia's energy, metals, defense, transport, and financial sectors. Among individual stocks, LRS shares soared more than 18% after the board approved a dividend proposal of 78 rubles per common share for 2022. Instead, shareholders in Surgut, Raspadskaya, and Akron decided not to distribute a dividend. The MOEX index was up 2.5% for the week.

The Australian S&P/ASX 200 index climbed 0.4% to above 7,260 on Friday, its second straight session of gains, led by gains in technology and financial stocks. Australian shares also followed Wall Street's overnight gains as progress in debt-ceiling talks and upbeat corporate updates in the U.S. boosted sentiment. Financials rose strongly, including Commonwealth Bank (1%), Westpac (0.6%), NAB (0.8%), ANZ Banking Group (0.7%), and Macquarie Group (1.5%). Tech stocks also rose, such as Computershare (1.5%), Block Inc (3.2%), NextDC (0.9%), Appen (3.3%), and Seek (1.1%). In company news, Xero rose 2.9% and Citi set the company's target The share price was raised to A$120 per share.

New Zealand shares fell 12 points, or 0.1%, to 12,087 in early trade at the start of the week as traders awaited the outcome of the RBNZ monetary policy meeting later in the week. Since October 2021, the central bank has raised interest rates by a total of 500 basis points, and is expected to raise the cash rate by 25 basis points to 5.5%. The risk of a debt default in Washington also weighed on sentiment, with reports that President Joe Biden and House Speaker Kevin McCarthy will meet on Monday to discuss the debt ceiling. Earlier, the president had a "productive" phone call on his return to Washington. Technology services and non-energy minerals saw sharp declines. In the fall of Scott Tec. (-2%), Foley Wines Limited (-3%), Move Logistics (-1%), Ebos Group (-0.9%), and Manawa Energy (-0.4%). Wellington forecast in a new budget on Friday that New Zealand's economy would avoid recession this year thanks to a rebound in tourism and strong government spending, with the index hitting a three-month peak

The Hongkong Hang Seng Index fell 276.68 points, or 1.4%, to close at 19,450.57 points, its lowest close since March 20, down 0.9% on a weekly basis, its seventh straight decline, with technology and consumer indexes broadly falling, each down about 2%. Shares of Alibaba Group Holdings fell 6.5% after a weaker-than-expected earnings report and plans to spin off the company's cloud unit. Signs of progress in U.S. debt-ceiling talks failed to lift risk appetite, as Chinese data last week showed activity on the mainland was losing steam, while the offshore yuan weakened to its strongest level since late last year. Investors were also cautious ahead of Fed Chairman Jerome Powell's speech at a meeting later in the day as they looked for clues on the central bank's possible next move on interest rates. KE Holdings (-6.8%), Kuaishou Technology (-4.8%), JD.com (-4.6%), Meituan (-3.8%), Chuxing (-3.7%), and Tencent Holdings also posted large losses.(-2%)..

The Shanghai Composite Index fell 0.7% to close below 3,280 points, while the Shenzhen Composite Index fell 0.1% to close at 1,060 points, reversing gains made earlier in the week, with almost all sectors participating in the decline. Investors continued to assess the strength of China's post-epidemic recovery after a flurry of economic data suggested a challenging road to recovery. Financial and industrial stocks led the decline, with Ping An Insurance (-1.7%), PetroChina Capital (-3%), AVIC Finance (-3.8%), China State Construction (-1.4%), and China Railway Group (-2%) falling significantly . New energy stocks also fell, including Tianqi Lithium (-1.1%) and Longji Green Energy (-0.7%).

Nikkei 225 rose 0.5 percent to close above 30,700 and the Topix rose 0.2 percent to close at 2,163, with both benchmarks hitting their highest levels since August 1990 on strong domestic earnings And a weaker yen boosted the outlook for Japanese stocks. Local stocks also followed Wall Street's overnight gains as progress in debt ceiling talks and upbeat corporate updates in the U.S. boosted sentiment. Also, investors digested data showing that core inflation in Japan accelerated again in April, casting doubt on the Bank of Japan's view that inflation will slow below target later this year as cost pressures dissipate. Technology stocks led gains, led by Tokyo Electron (0.2%), SoftBank Group (0.6%), Abalance (7.3%), Keyence (1.1%), and Recruit Holdings (3.1%).

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most critical data is:

- JP: In March 2023, Japan's core machinery orders (excluding ships and power companies' orders) fell by 3.9% month-on-month, a slight improvement from 4.5% in February, but missed market expectations for a 0.7% increase. The highly volatile data series is considered a leading indicator of capital spending over the next six to nine months. On an annual basis, private sector machinery orders fell 3.5% in March, reversing a 9.8% rise in February and beating forecasts for a 1.4% increase.

- US: In the US, the focus will be on debt ceiling talks, FMOC minutes, and several Fed speeches. In addition, investors will be closely watching data on personal income and spending, consumer goods prices, the second estimate of GDP growth, corporate profits, durable goods orders, services and manufacturing PMIs, and new and off-the-plan home sales. In addition, new PMIs are expected in May for the UK, Australia, the Eurozone, Japan, France, and Germany. Finally, UK and South African inflation rates are due, while monetary policy decisions are still pending in China, New Zealand, South Korea, Indonesia, Turkey, and South Africa.

- CA: According to preliminary estimates, in April 2023, Canadian retail sales are expected to increase by 0.2% month-on-month. Considering that in March, retail sales fell by 1.4% month-on-month, in line with the initial figure, mainly due to declines at auto and parts dealers (-4.4%), service stations, and fuel suppliers (-3.9%). On the other hand, core retail sales, which exclude gas stations, fuel suppliers, and auto and parts dealers, rose 0.3 percent, the fourth straight gain. The main upward contribution came from higher sales at building material and garden equipment and supply dealers (+1.6%), sporting goods, hobby, musical instruments, books, and other retailers (+1.1%), while clothing, clothing accessories, shoes, jewelry, luggage, and leather retailers saw the largest decline in sales (-1.2%).

- IT: Italian construction output fell 3.4% year-on-year in March 2023, following a revised 0.1% decline in the previous month. It marked the second straight month of contraction in the country's construction sector and the fastest since June 2020 in the face of rising borrowing costs. While keeping inflation in check to some extent, higher interest rates could exacerbate supply chain problems and drive up construction material prices. On a seasonally adjusted monthly basis, construction production edged up 0.1% in March after falling 0.3% the previous month.

- GE: Germany's annual producer inflation rate fell to a 25-month low of 4.1% for the seventh month in a row in April 2023, slightly above forecasts of 4%. The main upward pressure came from capital goods (6.8%), especially machinery (8.6%), vehicles (5.6%) and manufactured steel and light metals (5.3%). Other notable cost increases came from non-durable goods (11.4%), such as food (11.6%); durable goods (8.8%), mainly furniture (10.2%) and appliances (9.5%); and intermediate goods (0.2%) , namely cement (42.5%), wood chips (11.8%) and household and hygiene products (21.9%). Elsewhere, energy prices rose 2.8 percent, down from a 6.8 percent gain in the previous month, as natural gas distribution rose 10.8 percent and electricity costs fell 2.9 percent. Excluding energy, producer prices rose 4.8% year over year. Producer prices rose 0.3% on a monthly basis after falling 1.5% in March, compared with forecasts for a 0.5% decline.

- SW: Swedish industry was operating at 90.6% of its capacity in the first quarter of 2023, up from 89.8% in the previous quarter. The latest data also beat market expectations, showing a quarterly decline of 0.3%, as capacity utilization improved in the manufacturing sector (90.4% vs. 89.7% in the previous quarter), especially steel and metal plants and motor vehicles and trailers; mining (95.1% vs. 91.9%). A year ago, production capacity also reached 90.6%.

- JP: In April 2023, Japan's core consumer price index (excluding fresh food, but including fuel costs) rose 3.4% year-on-year, up from 3.1% in March and consensus forecasts. Core inflation figures also topped the central bank's 2 percent target for the 13th straight month, challenging the BOJ's view that inflation will slow below the target later this year as cost pressures dissipate. The Bank of Japan maintained its ultra-loose monetary policy and made no adjustments to yield curve control. At the April meeting, BOJ Governor Kazuo Ueda repeatedly stressed the need to maintain current policy settings until there is more evidence that rising inflation is becoming more sustainable and driven by strong demand rather than supply pressures.

- UK: UK GfK consumer confidence rose to -27 in May 2023 from -30 in April, improving for the fourth consecutive month, as UK households grew more optimistic about the economy and finances despite persistent inflation. The May figure was also the highest in 15 months, in line with consensus forecasts. In GfK's gauges of how consumers view the economy over the next 12 months, their feelings about their personal finances and their willingness to buy expensive goods all rose, while their willingness to save was unchanged. Joe Staton, Director of Client Strategy at GfK, said: "The overall trajectory of this year has been positive and may reflect that underlying financial conditions across the UK are stronger than many imagine. But everyone must see the light of day, as there is still a lot to come out of these difficult times. It can be a difficult road."

- NZ: In April 2023, New Zealand's trade surplus fell to NZ$427 million from NZ$469 million a year earlier, and imports grew at a rate of 12% to NZ$6.38 billion. Purchases rose in petroleum and products (311.7%); mechanical machinery and equipment (11.2%); electrical machinery and equipment (17.4%), and aircraft and parts (168.5%). Export growth, meanwhile, slowed by 10.4 percent to NZ$6.8 billion due to higher sales of milk powder, butter, and cheese (26.1 percent); meat and offal (3.5 percent); logs, timber, and wood products (0.4 percent); fruit (2.1%); preparations of milk, cereals, flour, and starch (28.1%); wine (20.8%); and ships, vessels, and floating structures (539.2%). In contrast, outbound shipments of crude oil decreased (-100%); wood pulp and waste paper decreased (-53%); casein and caseinates decreased (-11.8%), and aluminum and aluminum products decreased (-8.6%) ).

 

LOOKING AHEAD:

Today, investors should watch out for the following important data:

- CAD: Bank Holiday.

- JPY: Core Machinery Orders m/m.

- GBP: Rightmove HPI m/m.

- EUR: Consumer Confidence.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: U.S. stock futures fell on Monday as uncertainty over U.S. debt-ceiling talks continued to weigh on sentiment. Futures contracts linked to the three major indexes were all down about 0.1%. For the week, the Dow rose 0.38%, the S&P 500 rose 1.65%, and the Nasdaq Composite gained 3.04% as a strong rally in big tech stocks outweighed concerns about the U.S. debt limit and stubborn inflation. U.S. President Joe Biden and House Speaker Kevin McCarthy are set to continue talks on Monday after Treasury Secretary Janet Yellen repeatedly warned that the U.S. could default on payments as early as June 1 if no deal is reached to raise the U.S. debt ceiling. Investors are also looking ahead to a slew of U.S. economic reports last week, including a secondary reading of first-quarter GDP and a measure of personal consumption expenditure inflation. In addition, companies such as Zoom Video, Lowe's, and Dick's Sporting Goods will also report earnings.

- IT: Italy's 10-year bond yield breached the 4.3% mark, reaching its highest level since April 27, buoyed by optimism surrounding U.S. debt-ceiling talks, strong U.S. labor data affecting the central bank, and fears of further ECB rate hike expectations. The weekly U.S. jobless claims fell more than expected, prompting some central bankers to publicly advocate for further rate hikes. In Europe, European Central Bank policymaker Joachim Nagel recently said the rate hike implemented in May would not be the last. Finally, ratings agency Moody's plans to review Italy's credit rating after the market closes on Friday. While a downgrade to "junk" status is possible, analysts generally view such an outcome as unlikely.

- UK: U.K. 10-year government bond yields are nearing 4%, the highest since October 2022, buoyed by strong data and optimism surrounding ongoing U.S. debt-ceiling talks. UK GFK consumer confidence rose for the fourth month in a row in May, reaching its highest level since the Russian invasion of Ukraine. Meanwhile, Bank of England Governor Andrew Bailey acknowledged that further tightening of monetary policy may be necessary if inflationary pressures persist. However, he also noted some signs that the labor market is experiencing a slight slack. Earlier this month, the Bank of England raised its key interest rate by 25 basis points to 4.5%, the highest borrowing cost since 2008. In addition, the bank raised its growth and inflation forecasts, reflecting changes in economic conditions. Also, strong U.S. economic indicators point to a tight labor market, prompting some U.S. central bankers to advocate for further rate hikes.

- GE: German 10-year government bond yields have surpassed 2.4%, reaching their highest level since April 27, buoyed by optimism over U.S. debt-ceiling talks, strong economic data pointing to a tight U.S. labor market, and a strong outlook for euro zone GDP growth. On the economic data front, German producer prices rose 4.1% year-on-year in April, the lowest level in more than two years. However, the unexpected monthly increase came in at 0.3%. In addition, the European Commission revised its economic forecast, predicting higher growth rates of 1.1% and 1.6% this year and 2024, respectively. The committee also forecasts inflation of 5.8 percent in 2023 and 2.8 percent in 2024. Market watchers expect the ECB to gradually raise the deposit facility rate, which could peak at around 3.7% by September.

 

LEADING MARKET SECTORS:

Strong sectors: Energy, Health Care.

Weak sectors: Consumer Discretionary, Financials, Industrials, Real Estate, Communication Services.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- NZD: The New Zealand dollar rose 0.2% to $0.6233 on Friday, after falling to $0.6203 in the previous session, and was poised to gain 0.4% for the week, on the back of signs of domestic growth amid a rebound in tourism activity and increased government expenditure. Recovering economy. According to Treasury projections, rather than falling into recession in the second half of 2023, the nation's GDP is expected to grow by 1% in the 12 months leading up to June. It also anticipates that the cash rate will remain elevated for a longer period of time and will not decline below 5% until 2024. Next week, the Reserve Bank of New Zealand is anticipated to increase borrowing costs by 25 basis points to 5.5%, with many market participants predicting additional tightening in July. As investors continued to concentrate on U.S. efforts to prevent a debt default, the U.S. dollar index remained relatively unchanged, trading around 103.4 after hitting a seven-week high on Thursday.

 

CHART OF THE DAY:

On Friday, the U.S. dollar index extended losses to around 103.1 points, falling further from the previous day's two-month high of 103.6 points, as investors concentrated on the debt ceiling impasse and adjusted their expectations for the next Federal Reserve move. According to reports, Republican negotiators left the debt-ceiling meeting, dashing prospects for an agreement. In the meantime, Fed Chairman Jerome Powell emphasized that inflation is significantly above the central bank's target and reaffirmed the Fed's objective of reducing inflation to 2%. In spite of this, the chairman stated that it may not be necessary to raise interest rates to combat inflation due to the tension in the banking industry. The market currently anticipates a 36% probability of a 25 basis point increase in the Fed funds rate in June. The dollar was projected to gain 0.3% for the week, indicating its second consecutive weekly gain.

 

 

 

Long-term Channels Trading Strategy for: (U.S. dollar index DXY).Time frame (D1). The primary resistance with a potential (consolidation area) is around (105.893). The primary support with a potential  (consolidation area) is around (102.008). Therefore, the next most probable price movement is a (consolidation) trend. (*see all other details on the chart).

Punchbowl News reporting that debt ceiling talks have stalled and CNN reporting that Treasury Secretary Janet Yellen told bank CEOs that more mergers might be needed around the same time

GLOBAL CAPITAL MARKETS OVERVIEW, ANALYSIS & FORECASTS:

Author: Dr. Alexander APOSTOLOV (researcher at Economic Research Institute at BAS)

The Dow closed more than 100 points lower on Friday, while the S&P 500 and Nasdaq fell 0.1% and 0.2%, respectively, as a pause in U.S. debt-limit talks spooked investors. Meanwhile, Fed Chairman Jerome Powell said inflation was well above target and the central bank was committed to bringing it back to its 2% target, but that rate hikes may not be necessary due to stress in the banking sector. Western Union and Pacific Western fell 2.4 percent and 1.9 percent, respectively, despite gains of more than 24 percent for the week. In corporate news, shares of Deere & Co. fell 1.9% after its earnings and revenue topped estimates. Shares of Foot Locker fell 27.1% after disappointing quarterly results. Conversely, Farfetch rose 14.7% after a surprise first-quarter revenue increase. For the week, the Dow rose 0.7%, the S&P 500 rose 1.8%, marking its best week since March, and the Nasdaq rose 3%, also its biggest weekly gain in two months.

The Canada S&P/TSX Composite edged up 0.2% on Friday to close around 20,350, its third straight session of gains, as higher commodity prices lifted shares of energy and mining companies. Meanwhile, Wall Street peers underperformed after Republican negotiators pulled out of a debt-ceiling meeting. Energy stocks rose 1.2 percent, mining stocks rose 0.8 percent, and shares in Wesdome Gold Mining rose 2.2 percent each. On the domestic data front, as expected, Canadian retail sales fell 1.4% month-on-month in March, suggesting consumers are struggling with the cost of living amid rising inflation and rising interest rates. In corporate news, Edenbrook Capital, which owns 10.4 percent of Absolute Software, said Crosspoint Capital Partners' deal to take the software company private significantly undervalued the company. Still, the benchmark fell 0.5% for the week, its fourth straight weekly decline.

Germany's DAX reached a record high of 16,275 points on Friday, while the Stoxx 600 rose 0.8% to its highest level in over a year, buoyed by optimism that the U.S. debt ceiling may be resolved. President Joe Biden and top Congressional Republican Kevin McCarthy said they were determined to reach a quick deal to raise the government's borrowing limit. At the closing session in Europe, however, there was some uncertainty as Republican negotiators reportedly pulled out of the debt ceiling meeting. Europe's ongoing corporate earnings season has been strong, with major companies continuing to beat expectations. On the economic data front, German producer price inflation slowed to its lowest level in more than two years, pointing to further easing of inflationary pressures in Europe's largest economy.The CAC 40 rose about 0.6 percent to close at a near one-month high of 7,492 on Friday, tracking gains by its European peers as investors remained optimistic that a resolution on the U.S. debt ceiling was imminent. Jerome Powell, the chairman of the Federal Reserve, made comments that improved sentiment by suggesting that tighter credit conditions could reduce pressure to raise interest rates in light of recent turmoil in the American financial system. Among individual stocks, the biggest gainers were Veolia Environnement (+2.1%), Stellantis NV (+1.9%), Saint-Gobain (+1.8%), and Sanofi (+1.4%). In contrast, Kering (-1.8%), EssilorLuxottica (-1.6%) and Thales (-0.8%) were the biggest losers. The CAC 40 gained about 1% for the week.FTSE MIB rose about 1.1% to close at a more than two-week high of 27,520, outperforming its European peers. The main support came from shares of Interpump Group (+4.4%), after the company announced the acquisition of a small milking products business in New Zealand, which is expected to strengthen its position in the food industry. Hera (+3.1%) and A2a (+2.3%) led the way for the utilities sector, which also performed well. Meanwhile, investors continued to focus on ongoing negotiations on the U.S. debt ceiling and digested a speech from Federal Reserve Chairman Jerome Powell that eased concerns about further rate hikes. Domestically, caution prevailed as ratings agency Moody's was due to release an update on Italy's sovereign rating later in the day. The FTSE MIB ended the week up around 0.6 percent.

The ruble-based MOEX Russia index edged lower on Friday after Britain announced a ban on Russian diamonds and restrictions on imports of Russian-origin copper, aluminum, and nickel. In 2021, the export value of Russian diamonds will be 4 billion US dollars. In addition, the government introduced new individual titles targeting 86 people and companies related to Russia's energy, metals, defense, transport, and financial sectors. Among individual stocks, LRS shares soared more than 18% after the board approved a dividend proposal of 78 rubles per common share for 2022. Instead, shareholders in Surgut, Raspadskaya, and Akron decided not to distribute a dividend. The MOEX index was up 2.5% for the week.

The Australian S&P/ASX 200 index climbed 0.4% to above 7,260 on Friday, its second straight session of gains, led by gains in technology and financial stocks. Australian shares also followed Wall Street's overnight gains as progress in debt-ceiling talks and upbeat corporate updates in the U.S. boosted sentiment. Financials rose strongly, including Commonwealth Bank (1%), Westpac (0.6%), NAB (0.8%), ANZ Banking Group (0.7%), and Macquarie Group (1.5%). Tech stocks also rose, such as Computershare (1.5%), Block Inc (3.2%), NextDC (0.9%), Appen (3.3%), and Seek (1.1%). In company news, Xero rose 2.9% and Citi set the company's target The share price was raised to A$120 per share.

New Zealand shares fell 12 points, or 0.1%, to 12,087 in early trade at the start of the week as traders awaited the outcome of the RBNZ monetary policy meeting later in the week. Since October 2021, the central bank has raised interest rates by a total of 500 basis points, and is expected to raise the cash rate by 25 basis points to 5.5%. The risk of a debt default in Washington also weighed on sentiment, with reports that President Joe Biden and House Speaker Kevin McCarthy will meet on Monday to discuss the debt ceiling. Earlier, the president had a "productive" phone call on his return to Washington. Technology services and non-energy minerals saw sharp declines. In the fall of Scott Tec. (-2%), Foley Wines Limited (-3%), Move Logistics (-1%), Ebos Group (-0.9%), and Manawa Energy (-0.4%). Wellington forecast in a new budget on Friday that New Zealand's economy would avoid recession this year thanks to a rebound in tourism and strong government spending, with the index hitting a three-month peak

The Hongkong Hang Seng Index fell 276.68 points, or 1.4%, to close at 19,450.57 points, its lowest close since March 20, down 0.9% on a weekly basis, its seventh straight decline, with technology and consumer indexes broadly falling, each down about 2%. Shares of Alibaba Group Holdings fell 6.5% after a weaker-than-expected earnings report and plans to spin off the company's cloud unit. Signs of progress in U.S. debt-ceiling talks failed to lift risk appetite, as Chinese data last week showed activity on the mainland was losing steam, while the offshore yuan weakened to its strongest level since late last year. Investors were also cautious ahead of Fed Chairman Jerome Powell's speech at a meeting later in the day as they looked for clues on the central bank's possible next move on interest rates. KE Holdings (-6.8%), Kuaishou Technology (-4.8%), JD.com (-4.6%), Meituan (-3.8%), Chuxing (-3.7%), and Tencent Holdings also posted large losses.(-2%)..

The Shanghai Composite Index fell 0.7% to close below 3,280 points, while the Shenzhen Composite Index fell 0.1% to close at 1,060 points, reversing gains made earlier in the week, with almost all sectors participating in the decline. Investors continued to assess the strength of China's post-epidemic recovery after a flurry of economic data suggested a challenging road to recovery. Financial and industrial stocks led the decline, with Ping An Insurance (-1.7%), PetroChina Capital (-3%), AVIC Finance (-3.8%), China State Construction (-1.4%), and China Railway Group (-2%) falling significantly . New energy stocks also fell, including Tianqi Lithium (-1.1%) and Longji Green Energy (-0.7%).

Nikkei 225 rose 0.5 percent to close above 30,700 and the Topix rose 0.2 percent to close at 2,163, with both benchmarks hitting their highest levels since August 1990 on strong domestic earnings And a weaker yen boosted the outlook for Japanese stocks. Local stocks also followed Wall Street's overnight gains as progress in debt ceiling talks and upbeat corporate updates in the U.S. boosted sentiment. Also, investors digested data showing that core inflation in Japan accelerated again in April, casting doubt on the Bank of Japan's view that inflation will slow below target later this year as cost pressures dissipate. Technology stocks led gains, led by Tokyo Electron (0.2%), SoftBank Group (0.6%), Abalance (7.3%), Keyence (1.1%), and Recruit Holdings (3.1%).

 

REVIEWING THE LAST ECONOMIC DATA:

Reviewing the latest economic  news, the most critical data is:

- JP: In March 2023, Japan's core machinery orders (excluding ships and power companies' orders) fell by 3.9% month-on-month, a slight improvement from 4.5% in February, but missed market expectations for a 0.7% increase. The highly volatile data series is considered a leading indicator of capital spending over the next six to nine months. On an annual basis, private sector machinery orders fell 3.5% in March, reversing a 9.8% rise in February and beating forecasts for a 1.4% increase.

- US: In the US, the focus will be on debt ceiling talks, FMOC minutes, and several Fed speeches. In addition, investors will be closely watching data on personal income and spending, consumer goods prices, the second estimate of GDP growth, corporate profits, durable goods orders, services and manufacturing PMIs, and new and off-the-plan home sales. In addition, new PMIs are expected in May for the UK, Australia, the Eurozone, Japan, France, and Germany. Finally, UK and South African inflation rates are due, while monetary policy decisions are still pending in China, New Zealand, South Korea, Indonesia, Turkey, and South Africa.

- CA: According to preliminary estimates, in April 2023, Canadian retail sales are expected to increase by 0.2% month-on-month. Considering that in March, retail sales fell by 1.4% month-on-month, in line with the initial figure, mainly due to declines at auto and parts dealers (-4.4%), service stations, and fuel suppliers (-3.9%). On the other hand, core retail sales, which exclude gas stations, fuel suppliers, and auto and parts dealers, rose 0.3 percent, the fourth straight gain. The main upward contribution came from higher sales at building material and garden equipment and supply dealers (+1.6%), sporting goods, hobby, musical instruments, books, and other retailers (+1.1%), while clothing, clothing accessories, shoes, jewelry, luggage, and leather retailers saw the largest decline in sales (-1.2%).

- IT: Italian construction output fell 3.4% year-on-year in March 2023, following a revised 0.1% decline in the previous month. It marked the second straight month of contraction in the country's construction sector and the fastest since June 2020 in the face of rising borrowing costs. While keeping inflation in check to some extent, higher interest rates could exacerbate supply chain problems and drive up construction material prices. On a seasonally adjusted monthly basis, construction production edged up 0.1% in March after falling 0.3% the previous month.

- GE: Germany's annual producer inflation rate fell to a 25-month low of 4.1% for the seventh month in a row in April 2023, slightly above forecasts of 4%. The main upward pressure came from capital goods (6.8%), especially machinery (8.6%), vehicles (5.6%) and manufactured steel and light metals (5.3%). Other notable cost increases came from non-durable goods (11.4%), such as food (11.6%); durable goods (8.8%), mainly furniture (10.2%) and appliances (9.5%); and intermediate goods (0.2%) , namely cement (42.5%), wood chips (11.8%) and household and hygiene products (21.9%). Elsewhere, energy prices rose 2.8 percent, down from a 6.8 percent gain in the previous month, as natural gas distribution rose 10.8 percent and electricity costs fell 2.9 percent. Excluding energy, producer prices rose 4.8% year over year. Producer prices rose 0.3% on a monthly basis after falling 1.5% in March, compared with forecasts for a 0.5% decline.

- SW: Swedish industry was operating at 90.6% of its capacity in the first quarter of 2023, up from 89.8% in the previous quarter. The latest data also beat market expectations, showing a quarterly decline of 0.3%, as capacity utilization improved in the manufacturing sector (90.4% vs. 89.7% in the previous quarter), especially steel and metal plants and motor vehicles and trailers; mining (95.1% vs. 91.9%). A year ago, production capacity also reached 90.6%.

- JP: In April 2023, Japan's core consumer price index (excluding fresh food, but including fuel costs) rose 3.4% year-on-year, up from 3.1% in March and consensus forecasts. Core inflation figures also topped the central bank's 2 percent target for the 13th straight month, challenging the BOJ's view that inflation will slow below the target later this year as cost pressures dissipate. The Bank of Japan maintained its ultra-loose monetary policy and made no adjustments to yield curve control. At the April meeting, BOJ Governor Kazuo Ueda repeatedly stressed the need to maintain current policy settings until there is more evidence that rising inflation is becoming more sustainable and driven by strong demand rather than supply pressures.

- UK: UK GfK consumer confidence rose to -27 in May 2023 from -30 in April, improving for the fourth consecutive month, as UK households grew more optimistic about the economy and finances despite persistent inflation. The May figure was also the highest in 15 months, in line with consensus forecasts. In GfK's gauges of how consumers view the economy over the next 12 months, their feelings about their personal finances and their willingness to buy expensive goods all rose, while their willingness to save was unchanged. Joe Staton, Director of Client Strategy at GfK, said: "The overall trajectory of this year has been positive and may reflect that underlying financial conditions across the UK are stronger than many imagine. But everyone must see the light of day, as there is still a lot to come out of these difficult times. It can be a difficult road."

- NZ: In April 2023, New Zealand's trade surplus fell to NZ$427 million from NZ$469 million a year earlier, and imports grew at a rate of 12% to NZ$6.38 billion. Purchases rose in petroleum and products (311.7%); mechanical machinery and equipment (11.2%); electrical machinery and equipment (17.4%), and aircraft and parts (168.5%). Export growth, meanwhile, slowed by 10.4 percent to NZ$6.8 billion due to higher sales of milk powder, butter, and cheese (26.1 percent); meat and offal (3.5 percent); logs, timber, and wood products (0.4 percent); fruit (2.1%); preparations of milk, cereals, flour, and starch (28.1%); wine (20.8%); and ships, vessels, and floating structures (539.2%). In contrast, outbound shipments of crude oil decreased (-100%); wood pulp and waste paper decreased (-53%); casein and caseinates decreased (-11.8%), and aluminum and aluminum products decreased (-8.6%) ).

 

LOOKING AHEAD:

Today, investors should watch out for the following important data:

- CAD: Bank Holiday.

- JPY: Core Machinery Orders m/m.

- GBP: Rightmove HPI m/m.

- EUR: Consumer Confidence.

 

KEY EQUITY & BOND MARKET DRIVERS:

Кey factors in the stock and bond market are currently:

- US: U.S. stock futures fell on Monday as uncertainty over U.S. debt-ceiling talks continued to weigh on sentiment. Futures contracts linked to the three major indexes were all down about 0.1%. For the week, the Dow rose 0.38%, the S&P 500 rose 1.65%, and the Nasdaq Composite gained 3.04% as a strong rally in big tech stocks outweighed concerns about the U.S. debt limit and stubborn inflation. U.S. President Joe Biden and House Speaker Kevin McCarthy are set to continue talks on Monday after Treasury Secretary Janet Yellen repeatedly warned that the U.S. could default on payments as early as June 1 if no deal is reached to raise the U.S. debt ceiling. Investors are also looking ahead to a slew of U.S. economic reports last week, including a secondary reading of first-quarter GDP and a measure of personal consumption expenditure inflation. In addition, companies such as Zoom Video, Lowe's, and Dick's Sporting Goods will also report earnings.

- IT: Italy's 10-year bond yield breached the 4.3% mark, reaching its highest level since April 27, buoyed by optimism surrounding U.S. debt-ceiling talks, strong U.S. labor data affecting the central bank, and fears of further ECB rate hike expectations. The weekly U.S. jobless claims fell more than expected, prompting some central bankers to publicly advocate for further rate hikes. In Europe, European Central Bank policymaker Joachim Nagel recently said the rate hike implemented in May would not be the last. Finally, ratings agency Moody's plans to review Italy's credit rating after the market closes on Friday. While a downgrade to "junk" status is possible, analysts generally view such an outcome as unlikely.

- UK: U.K. 10-year government bond yields are nearing 4%, the highest since October 2022, buoyed by strong data and optimism surrounding ongoing U.S. debt-ceiling talks. UK GFK consumer confidence rose for the fourth month in a row in May, reaching its highest level since the Russian invasion of Ukraine. Meanwhile, Bank of England Governor Andrew Bailey acknowledged that further tightening of monetary policy may be necessary if inflationary pressures persist. However, he also noted some signs that the labor market is experiencing a slight slack. Earlier this month, the Bank of England raised its key interest rate by 25 basis points to 4.5%, the highest borrowing cost since 2008. In addition, the bank raised its growth and inflation forecasts, reflecting changes in economic conditions. Also, strong U.S. economic indicators point to a tight labor market, prompting some U.S. central bankers to advocate for further rate hikes.

- GE: German 10-year government bond yields have surpassed 2.4%, reaching their highest level since April 27, buoyed by optimism over U.S. debt-ceiling talks, strong economic data pointing to a tight U.S. labor market, and a strong outlook for euro zone GDP growth. On the economic data front, German producer prices rose 4.1% year-on-year in April, the lowest level in more than two years. However, the unexpected monthly increase came in at 0.3%. In addition, the European Commission revised its economic forecast, predicting higher growth rates of 1.1% and 1.6% this year and 2024, respectively. The committee also forecasts inflation of 5.8 percent in 2023 and 2.8 percent in 2024. Market watchers expect the ECB to gradually raise the deposit facility rate, which could peak at around 3.7% by September.

 

LEADING MARKET SECTORS:

Strong sectors: Energy, Health Care.

Weak sectors: Consumer Discretionary, Financials, Industrials, Real Estate, Communication Services.

 

TOP CURRENCY & COMMODITIES MARKET DRIVERS: 

Кey factors in the currency and commodities market are currently:

- NZD: The New Zealand dollar rose 0.2% to $0.6233 on Friday, after falling to $0.6203 in the previous session, and was poised to gain 0.4% for the week, on the back of signs of domestic growth amid a rebound in tourism activity and increased government expenditure. Recovering economy. According to Treasury projections, rather than falling into recession in the second half of 2023, the nation's GDP is expected to grow by 1% in the 12 months leading up to June. It also anticipates that the cash rate will remain elevated for a longer period of time and will not decline below 5% until 2024. Next week, the Reserve Bank of New Zealand is anticipated to increase borrowing costs by 25 basis points to 5.5%, with many market participants predicting additional tightening in July. As investors continued to concentrate on U.S. efforts to prevent a debt default, the U.S. dollar index remained relatively unchanged, trading around 103.4 after hitting a seven-week high on Thursday.

 

CHART OF THE DAY:

On Friday, the U.S. dollar index extended losses to around 103.1 points, falling further from the previous day's two-month high of 103.6 points, as investors concentrated on the debt ceiling impasse and adjusted their expectations for the next Federal Reserve move. According to reports, Republican negotiators left the debt-ceiling meeting, dashing prospects for an agreement. In the meantime, Fed Chairman Jerome Powell emphasized that inflation is significantly above the central bank's target and reaffirmed the Fed's objective of reducing inflation to 2%. In spite of this, the chairman stated that it may not be necessary to raise interest rates to combat inflation due to the tension in the banking industry. The market currently anticipates a 36% probability of a 25 basis point increase in the Fed funds rate in June. The dollar was projected to gain 0.3% for the week, indicating its second consecutive weekly gain.

 

 

 

Long-term Channels Trading Strategy for: (U.S. dollar index DXY).Time frame (D1). The primary resistance with a potential (consolidation area) is around (105.893). The primary support with a potential  (consolidation area) is around (102.008). Therefore, the next most probable price movement is a (consolidation) trend. (*see all other details on the chart).

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