Markets brace for US inflation and bank earnings

The Dow Jones Industrial Average closed more than 100 points higher on Monday, while the S&P 500 gained 0.1% and Nasdaq 100 finished slightly below the flatline as investors digested the latest job report and prepared for inflation data and bank earnings later this week. Friday’s jobs data revealed a still-tight labour market, supporting bets for another Fed rate hike in May but easing some concerns that the US economy is heading towards a recession. Focus now turns to the US CPI report due tomorrow and the first batch of companies reporting Q1 financial results for further clues about the economy’s health and the likely future interest rate rises. Meantime, European markets were closed yesterday in an extension of the Easter holidays. 

Summary as at 11.04.2023 

• Asian equities posted gains on Tuesday, boosted by investor optimism that the region’s central banks will continue to pause or end interest rate hike cycles, whatever action the US Federal Reserve takes. Japan’s Nikkei surged the most after a media report said that Berkshire Hathaway Inc. was considering more investment in local shares and increased its holdings in the country’s five major trading houses. 
• European shares are tipped to follow their Asian peers and US equity futures higher in holiday-thinned trading. 
• Oil prices were higher this morning as signs of a growing rebound in Chinese travel demand pushed up hopes of increased crude consumption this year, although anticipation of more cues on the US economy this week kept broader gains limited. Reuters reports that Chinese airlines were undertaking massive hiring drives to position for an expected rebound in travel demand this year. 
• China’s annual inflation rate unexpectedly reached 0.7% in March, compared with February’s print and market consensus of 1.0%. This was the lowest figure since September 2021, as the cost of both food and non-food eased further on the back of an uneven economic recovery. On a monthly basis, consumer prices unexpectedly dropped 0.3%, the second straight month of fall, missing estimates of a flat reading. Meantime, producer prices slumped 2.5% year-over-year, faster than a 1.4% fall in February and matching market forecasts. 
• Retail sales in the UK rose 4.9% on a like-for-like basis in March from a year ago, at the same pace in February and above market expectations of a 4.2% gain as boosted by purchases on Mother’s Day despite the cost-of-living pressures. Next month, retailers, pubs and restaurants, expect a boost from Britons celebrating King Charles’s coronation. 
• Traders raised the odds of another quarter-point rate increase by the Federal Reserve in May in the wake of strong employment data released Friday. Swap contact referencing Fed meeting dates repriced to levels indicating more than 80% odds of the US central bank raising its policy rate to 5%-5.25% on May 3. Separately, New York Fed President John Williams rejected the idea that the central bank’s aggressive interest-rate increases precipitated recent financial strains highlighted by recent banking failures. 
• Earlier today, Alibaba Group Holding Ltd unveiled Tongyi Qianwen, an Al large language model similar to GPT that it plans to integrate into all of the company’s business applications in the near future. It will first be integrated into DingTalk, Alibaba’s workplace messaging app and it can be used to summarise meeting notes, write emails and draft business proposals. 
• Newcrest Mining has agreed to open its books after gold mining giant Newmont sweetened its offer for its Australian rival with the equivalent of a $19.54 billion bid. Newcrest shareholders would own 31.1% of the combined company under a new offer of 0.4 Newmont shares for each Newcrest share held. The deal would be the world’s biggest gold miner and increase Newmont’s exposure to copper, at a time when analysts are predicting major shortages of the wiring metal over the coming decade.  
• Bitcoin breached the key $30,000 level for the first time in 10 months this morning, adding to its steady gains as investors raised bets that the US Federal Reserve will soon end its aggressive monetary tightening campaign. Bitcoin peaked at $30,438 in Asian trade after gaining about 6% since the start of the month. It rose by another 23% in March.