Indices 

For the third consecutive week, the major U.S. stock indices traded in a narrow range, resulting in fractional declines for the S&P 500, NASDAQ, and the Dow. The S&P 500 has seen a narrow gap of only 1.6% between its highest daily closing level and the lowest close since the beginning of April. In contrast, the pan-European STOXX Europe 600 Index rose by 0.45% in local currency terms, as positive sentiment towards the economic outlook offset concerns about persistently higher interest rates. Among the major European stock indices, Germany’s DAX climbed 0.47%, and the UK’s FTSE 100 Index increased by 0.54%.

Forex

On Thursday, the Dollar Index held steady around the 102 level after edging up in the prior session, supported by the belief that the Federal Reserve will continue to tighten the monetary policy. The comments from New York Fed Bank President John Williams on Wednesday, indicating that inflation remains problematic and that the central bank will take action to bring it down, further boosted the dollar. St. Louis Fed President James Bullard’s recent remarks advocating for a higher terminal rate of 5.50% to 5.75%, as well as Atlanta Fed President Raphael Bostic’s suggestion that there will be another 25 basis point rate hike before pausing, added to the bullish outlook. Despite the stronger-than-expected PMI data that reinforced the expectation of a rate hike in May, the Dollar Index remained flat on Friday, ending a five-week losing streak.

Macro

UK:
Between December 2022 and February 2023, the unemployment rate in the United Kingdom rose by 0.1 percentage points to 3.8%, the highest level since Q2 2022 and slightly surpassing the market expectations of 3.7%. While the total pay growth remained steady at 5.9% year-on-year in the three months leading up to February, real wages decreased by 3.0%, the largest decline from February to April 2009.

In March 2023, the consumer price inflation rate in the United Kingdom eased to 10.1% year-on-year, down from February’s 10.4% but higher than market expectations of 9.8%. The rate has been above 10% for seven consecutive periods, and the Bank of England’s target of 2% has not been met for nearly two years, indicating the possibility of continued borrowing cost increases.

EU:
In April 2023, the ZEW Indicator of Economic Sentiment for Germany dropped for the second month in a row to 4.1, the lowest figure so far this year, below the market forecasts of 15.3 and down from March’s value of 13. The current Conditions Index, on the other hand, increased to -32.5 compared to -46.5 in March and the forecasts of -40. Despite the improvement, the overall economic situation is still considered relatively negative.

The Euro Area’s annual inflation rate was confirmed at 6.9% in March 2023, marking a fifth consecutive month of decline from the record high of 10.6% in October 2022 and the lowest level since February 2022. Nonetheless, the rate remained high, well above the European Central Bank’s target of 2%, and the Core Index reached a new record high of 5.7%, putting pressure on policymakers to continue increasing interest rates.

US:
Housing starts in the US dropped by 0.8% month-over-month to a seasonally adjusted annualised rate of 1.42 million in March 2023, following a downwardly revised 7.3% surge in February but slightly exceeding the market forecasts of 1.4 million. Building permits in the US reported a rate of 1.413 million in March, missing the market expectations of 1.45 million and remaining close to December 2022’s 31-month low of 1.337 million, indicating a subdued housing demand due to rising interest rates and consumer prices.

In the week ending April 15th, 2023, the number of Americans filing for unemployment benefits rose by 5,000 to 245,000, the highest in a month and above the market expectations of 240,000. This result aligns with the recent data suggesting some softening in the US labour market, breaking the long streak of data pointing to a tight labour market despite the Federal Reserve’s aggressive rate hikes.

In March 2023, existing home sales in the US, including completed transactions of single-family homes, townhomes, condominiums, and co-ops, decreased by 2.4% mom to a seasonally adjusted annual rate of 4.44 million, compared to the market expectations of 4.5 million.