Indices 

On Friday, US stock indices closed slightly higher, with the Nasdaq leading at 1.89%, amid a new batch of earning reports. Although the week started with a tumble, positive earnings from mega-cap companies helped to sustain the indices. However, the prices are still mostly consolidating as investors wait for the FED’s rate decisions. In Europe, shares fell due to concerns that interest rate hikes could push the economy into a recession. The pan-European STOXX Europe 600 Index ended 0.50% lower in local currency terms. The major stock indexes showed mixed results, with Germany’s DAX rising by 0.26%, and the UK’s FTSE 100 Index falling by 0.55%.

Forex

Despite some losses on Friday, the Dollar closed slightly lower in the weekly data. Looking at the bigger picture, the Dollar Index completed a 2-week range as the market awaits the interest rate decision by the FED on May 3. With inflation remaining above target, the market is anticipating a 25 basis point rate hike. The yen, on the other hand, dropped across the board after the Bank of Japan announced that it would maintain ultra-low interest rates as expected and unanimously decided to make no changes to its yield curve control (YCC) policy. As a result, the Japanese currency fell to its lowest against the Euro since September 2008 and its weakest level in seven weeks versus the Dollar.

Macro

UK:

An industry survey released on Wednesday showed that despite the increase, most shop chains do not expect a long-lasting improvement in British retail sales in April. The retail sales balance for the month, as reported by the Confederation of British Industry, rose to +5 from +1 in March, marking the highest level for this year.

EU:

A preliminary estimate showed that the Eurozone economy expanded by a modest 0.1 percent in the first quarter of 2023, following a stagnant fourth quarter. However, this figure missed the market consensus of a 0.2 percent growth rate. The economy has been impacted by a surge in consumer prices, particularly due to the rising energy and food costs, as well as the European Central Bank’s most significant tightening of policy in over 20 years and the declining confidence. While Germany’s economy remained stagnant in the first quarter, the economies of France, Italy, and Spain showed some growth. 

Meanwhile, the unemployment rate in Germany held steady at 5.6 percent in April 2023, consistent with market expectations, with the number of jobless people rising by 24,000 to 2.567 million. The number of unemployed individuals increased by 274,000 year-on-year.

US:

A survey released on Tuesday revealed that US consumer confidence fell to a nine-month low in April due to a gloomier outlook on the economy, with some predicting a recession in the near future. The Conference Board reported a decline in its consumer confidence index from the revised 104.0 in March to 101.3 in April, marking its lowest level since July 2022.

Meanwhile, in a setback for the housing market, the National Association of Realtors (NAR) reported that contracts to purchase previously owned US homes unexpectedly dropped in March, ending a three-month rebound. The NAR’s Pending Home Sales Index, based on the signed contracts, fell by 5.2% to 78.9, the lowest since December. The housing market has been hit the hardest by the Federal Reserve’s aggressive interest rate increases aimed at curbing inflation.

However, the US manufacturing sector showed signs of improvement as new orders for manufactured durable goods rose by 3.2% in March, exceeding the market expectations of the 0.7% growth.

In other news, the number of Americans filing for unemployment benefits dropped to 230,000 in the week ending April 22nd, beating the market expectations of 249,000 and marking the first decrease in new unemployment claims in three weeks. Despite recent data suggesting some softening in the labour market, this trend indicates persistently tight labour conditions despite the Federal Reserve’s rate hikes.

Lastly, the US economy grew by 1.1% annualised in the first quarter of 2023, slowing from the previous quarter’s 2.6% expansion and falling short of market expectations of the 2% growth. The decline was attributed to a slowdown in business investment growth, declining inventories, and the continued negative effects of rising interest rates on the housing market.