Markets bet a peak in rates are on the horizon

US equities ended broadly higher Thursday, with the Dow Jones Industrials and S&P 500 Index closing at two-month highs after updated producer price data raised hopes that easing inflation pressures could encourage the Federal Reserve to be less aggressive on interest rates.  Elsewhere European equity markets also ended positively, with the Euro Stoxx 50 advancing by another 0.7% to reach 4,363 points. 

Summary as at 14.04.2023 

• Most Asian equities markets rose on Friday as softening inflation spurred growing expectations that global central banks will hold off from tightening policy further.  Singapore’s Monetary Authority became the latest in a growing list of central banks to pause future interest rate hikes.  The move also came as data showed that the Singapore economy slowed more than expected in Q1 2023.  The S&P/ASX 200, Nikkei 225, Hang Seng and Shanghai Composite all advanced. 
• European equities are primed to extend their winning streak on hopes that peak rates are on the horizon while US equity futures were seen a little bit more cautious ahead of the start of the corporate earnings season. 
• Oil prices rose slightly this morning as signs of increasing demand in China helped markets look past an OPEC warning on potential headwinds while tightening supply and a weaker dollar put crude on course for a fourth straight week.  China’s oil imports jumped over 22% in March to their highest level since June 2020 as the country’s refineries ramped up production to meet fuel export demand and as local consumption picked up after the removal of most anti-Covid restrictions. 

• The US dollar tumbled to a one-year low against a basket of currencies on Friday while the euro hit a one-year peak, as traders ramped up expectations of an imminent end to the US Federal Reserve’s rate-hike cycle on signs of cooling inflation.   
• The Producer Price Index (PPI) in the US fell 0.5% in March from February.  Economists had been expecting PPI to be unchanged from the month before.  Core PPI rose just 0.1%, also short of expectations for a 0.3% increase.  The apparent deceleration in inflation is raising expectations the Fed may enact the final interest rate increase of its 13-month hiking campaign at is May 2-3 meeting. 
• Delta Air Lines fell more than 1% yesterday after reporting quarterly earnings and revenue that fell short of Wall Street expectations.  The airline said it still expects record advance bookings for the summer and sees sales in the current quarter rising 15% to 17% over last year, higher than analysts’ estimates.   
• Friday brings earnings reports from several of the US biggest banks, including JPMorgan Chase, Citigroup, and Wells Fargo.  Bank of America, Goldman Sachs, and Morgan Stanley report next week to round out the six largest US banks.