Weekly market recap

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  • One of the main factors influencing the markets in recent days and probably in the coming period will be geopolitical developments in the Middle East. The failed attempt by Iran to attack Israel may have calmed the markets at first sight, but what will be more important is the Israeli response and whether the conflict escalates into a wider regional escalation.
  • What happens next and what the situation looks like in the oil market, for example, will depend on the reaction of Israel and the West. However, US President Biden has already warned Israel, despite US assistance in dealing with Iran, that he will not support a subsequent counter-attack.
  • Oil prices are down at the start of the week, but with oil rising to as high as $90 a barrel last week, the risk premium in anticipation of an attack was as high as $5. Given that Iran is a major oil producer, a retaliatory attack by Israel could mean a reduction in its production.
  • Unless supply is matched by other producers, a sustained high oil price could lead to higher fuel prices and consequent inflation. This in turn would mean further delays in interest rate cuts by central banks.


US stocks continued to fall last week. The main factors behind the stock declines are heightened concerns about the conflict in the Middle East and Wednesday’s inflation data. The latter rose above expectations in March and the markets reacted with a sharp fall. As a result, the S&P 500 hit four-week lows and the DJIA Index even fell to its lowest level since the end of January this year.

Stocks in Europe were similarly affected, with the Euro Stoxx 50 Index also at four-week lows. Of the major markets, only the FTSE 100 Index (+1.07%), which includes many multinational companies generating revenue from abroad and thus benefiting from the strengthening of the dollar against the pound, fared better. Europe’s STOXX Europe 600 Index ended 0.26% lower, Germany’s DAX lost 1.35% and France’s CAC 40 declined 0.63%.



Gold continues to rise and break historical records, on Friday it already broke the level of 2,400 USD per troy ounce. News of Iran’s pending attack on Israel and the threat of war across the Middle East region have fuelled a surge in safe-haven demand. A rise in demand for physical gold in China and from central banks also helped to push the price higher. The yellow metal is thus not bothered by the delay in interest rate cuts by central banks.

The US natural gas price did get to a high over $1.9/MMBtu during the week, but forecasts of falling demand and a larger-than-expected increase in US natural gas inventories pushed the price back below $1.8/MMBtu in the second half of the week. According to EIA data, inventories rose by 24 billion cubic feet last week, nearly double expectations. Also, the working natural gas inventories ended the winter heating season at 2,290 billion cubic feet, 39% more than the previous five-year average.



Geopolitical tensions also help the US dollar, which is a favourite safe haven in such situations. The Greenback was up by 1.6%, its best weekly performance since September 2022. The dollar was also helped in its rise by investor expectations that the Fed is likely to keep interest rates at current levels for longer than initially expected after the inflation data. Thus, most investors expect the Fed to proceed with a rate cut no earlier than September.

Against the dollar, virtually all other major currencies lost ground, with the Australian and New Zealand dollars seeing the biggest declines. The former fell to a two-month low against the USD, while the NZD, CAD and euro fell against the USD to near its lowest levels in five months. The British pound is at its lowest level since last November and the Japanese yen fell to a 34-year low against the dollar.



The most important data last week was US inflation, which surprised markets across all asset classes quite significantly. Annual inflation rate accelerated for a second straight month to 3.5% in March 2024, the highest since September, compared to 3.2% in February and forecasts of 3.4%. On a monthly basis, CPI rose 0.4%, the same as in February but above forecasts of 0.3%. These data pushed markets to reduce their expectations on the magnitude and timing of the Fed’s interest rate cuts. The majority of analysts adjusted their forecasts for the initial rate cut, moving it from June to September, and revised their outlook for the year to anticipate two reductions instead of three.

As expected, the ECB left its rates unchanged at historical highs at 4.0%. At the same time, policymakers reminded that if inflation data points to a sustained move towards the inflation target, the ECB could start cutting rates as early as June. They also reminded that the ECB is not dependent on the Fed, but on data from Europe.

The UK economy grew 0.1% in February and looks to have emerged from recession after a revised 0.3% growth in January. “These figures are a welcome sign that the economy is turning for the better,” said finance minister Jeremy Hunt in response to the data.

What to watch out for this week

  • The new week on the markets will be marked by reactions to a new wave of geopolitical tensions, corporate earnings and macro data releases. In the US, Goldman Sachs, UnitedHealth Group, Johnson & Johnson, Bank of America, Morgan Stanley, Netflix and Procter & Gamble, as well as American Express, Travelers, Schlumberger, Alcoa and United Airlines Holdings, among others, will report earnings.
  • Also, investors' focus will be on March's retail sales that are expected to have grown by 0.3%, following a 0.6% increase in February. The housing sector will be scrutinized as well, with attention on building permits, housing starts, existing home sales, and the NAHB Housing Market Index. Additional data to follow includes industrial production, business inventories, overall capital flows, the NY Empire State Manufacturing Index, and the Philadelphia Fed Manufacturing Index.
  • It will be a light week in Europe in terms of economic data, with ZEW economic sentiment and producer prices for Germany taking the spotlight. Also, final inflation figures, industrial production and trade balance will be released for Euro Area.
  • In China, all eyes will be on the GDP figures, expected to show the economy grew at Beijing’s target of 5%. Other releases include industrial production, retail sales, the unemployment rate, and house prices for March, in addition to a batch of credit data for the first quarter. In Japan, investors await March’s trade balance and inflation rate, set to unveil the impact of a weaker yen, and the Reuters Tankan index for April.
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