Weekly Market Wrap 21/04/2023

Economic data was mixed as UK CPI came in above expectations, US initial jobless claims came in higher than expected and European composite PMI came in ahead of expectations.

Dominic Raab resigned as deputy prime minister as an independent report into bullying claims upheld allegations.

UK Market 

The UK market ended the week up. UK CPI came in above expectations once again, with inflation failing to fall below 10%, holding at 10.1% YoY; economists had forecast a drop to 9.8%. The driving force behind the increase was rising food prices, whilst petrol costs fell. This data has reinforced the stance of the Bank of England that rates need to continue to go higher, with markets now clearly pricing in 0.25% increase at the BOEs next meeting, which would take the bank’s base rate to 4.50%. UK retail sales fell by more than expected in March, as poor weather conditions and consistent high levels of inflation caused sales to drop.

Dominic Raab resigned as deputy prime minister as an independent report into bullying claims upheld allegations. The resignation is of notable concern to Sunak, as Nadhim Zahawi and Sir Gavin Williamson have both previously been forced out of his top team over their conduct.

US Markets

The S&P 500 is currently ending the week down 0.25% at 4,129 and the NASDAQ is 0.72% lower at 12,985. US initial jobless claims came in higher than expected whilst continued jobless claims also surprised to the upside. The data suggests that the US labor market may be beginning to feel the pressure as the economy feels the effects of higher interest rates.

European Markets 

The Euro Stoxx 50 is currently down 0.31% at 4,377, the DAX is 0.38% lower at 15,746, whilst the CAC 40 has gained 0.18% to 7,535. The European economy appears to be recovering strongly, as Friday’s composite PMI came in ahead of expectations at 54.4 (est 53.7) as did the region’s services PMI 56.6 (est 54.5). The eurozone’s dominant services industry saw already-buoyant demand rise, more than offsetting a deepening downturn in manufacturing.

Fixed Income

Yields on 10-Year US government bonds were flat this week at 3.53%. Markets are still pricing in a 0.25% hike at the Fed’s May meeting.

Commodities

Brent Crude is on track for a sizeable loss (-5.77% at 81.33) as economic and interest rate uncertainty weighed; prices were stable on Friday as the euro zone recovery gathered pace unexpectedly.

The Week Ahead 

Monday –

Tuesday – US Consumer Confidence

Wednesday – US Durable Goods Orders

Thursday – US GDP & Initial Jobless Claims

Friday – European GDP

*Price changes as of last week’s close unless stated otherwise.