The world’s capital markets were left slightly shocked as the latest inflation print from the U.S. sent tremors across borders. The S&P 500 and the Dow Jones Industrial Average both had an extremely volatile week after inflation numbers came in higher than expected, reigniting speculation of delayed rate cuts. The yields on U.S. fixed-income securities rose once again for the second week in a row. The Fed’s reiteration of its hawkish stance on interest rates and inflation led to the rise in yields. China’s economic outlook was marred once again by underwhelming data for exports and investment banking.

Global Equity
  • The MSCI All Country World Index declined during the week, due to persisting inflation concerns as well as diminishing expectations for a U.S. Federal Reserve rate cut in June. Last week, global equity funds faced an outflow of $2.9 billion. Specifically, U.S. equity funds saw outflows of $2.7 billion, while Asian equity funds witnessed outflows worth $1.9 billion.
  • In the U.S., Federal Reserve Chairperson Jerome Powell reaffirmed his outlook for three quarter-point rate cuts during the year. 
  • European stocks rose during the week due to optimism about a rate cut by the European Central Bank as hinted by a surprise rate cut by the Swiss Central Bank. Germany witnessed a rise in industrial production by 2.1%. Inflation in France was recorded at 2.4% in March due to a rise in energy and food prices. 
  • China witnessed a decline in market performance due to lower possibilities of rate cuts by the Fed amid a murky inflation outlook. As per the latest data, investment banking declined in the first quarter of 2024. Market performance was affected by the underperformance of the real estate sector and exports and rating agency Fitch revised its outlook on China to negative.
  • The Japanese market was not directly impacted by the global banking instability. Japanese Finance Minister Shunichi Suzuki stated that they are monitoring yen fluctuations and are prepared to act if currency swings become excessive. As part of its historic shift away from ultra-accommodative policy, the Bank of Japan is scaling back corporate bond purchases.
U.S. Equity
  • The S&P 500 this week saw multiple fluctuations. S&P began the week at 5,210, fell to 5,143 mid-week, and ended the week at 5,198.
  • S&P Dow Jones Indices reported that dividend payouts in the U.S. rose by a net $16 billion in the first quarter of 2024 led by large-caps, Meta, Salesforce, and Booking Holdings.
  • S&P Dow Jones also reported that large caps are weathering uncertainty and market volatility better than smaller cap companies.
  • GE Aerospace shares surged as the company announced a 250% increase in its quarterly dividend to 28 cents from 8 cents per share.
  • Mid-Week inflation shock drove major stock indexes lower, with 10 of the S&P 500’s 11 sectors falling and the Dow Jones Industrial Average losing more than 400 points.
  • Kimberly-Clark announced that it will sell its PPE Business to Ansell for $640 Million.
  • Moderna shares soared 6.2%, topping the S&P 500 as the biotech firm reported positive data from an early-stage trial of its individualized cancer.
  • The U.S. Justice Department has opened an extended antitrust investigation into Nippon Steel’s $14.1 billion takeover bid for United States Steel Corp., creating additional legal hurdles to completing the deal.
  • Alphabet neared $2 trillion market capitalization and its stock traded at a lower forward price-to-earnings ratio than Apple, Microsoft, and Nvidia.
U.S. Fixed Income
  • The Bloomberg U.S. Aggregate Bond Index was low over the week. The slight decline can be attributed to the uncertainty of rate cuts, higher inflation and the associated inflationary pressure.
  • The U.S. 10-year Treasury yield hit 4.57% during the week, the highest level in over 5 months. The yield on the 2-year was at 4.9%. 
  • The U.S. Dollar Index strengthened over the week as anticipations of potential interest rate cuts by the Fed weighed on the currency.
Sources

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