Markets on Edge Ahead of Fed and NFP; Global PMIs Hint at Growth Divergence

Summary

Last week, global markets faced sharp volatility driven by U.S. inflation, weak GDP data, tech earnings, and geopolitical tensions. The U.S. economy slowed more than expected in Q1 2024, with GDP growth at 1.6%, fueling stagflation concerns. Meanwhile, core PCE inflation remained sticky at 3.7%. In Europe, inflation softened slightly, but PMI data hinted at stagnation risks. The Bank of Japan disappointed by maintaining bond purchases, triggering a yen rally. China’s fragile recovery continued, with manufacturing PMI slipping into contraction.
This week, global markets turn their focus to the FOMC rate decision, U.S. Nonfarm Payrolls, and fresh PMI readings worldwide, setting the tone for May’s trading outlook.

United States 🇺🇸

Last Week

• GDP (Q1 2024): Growth slowed sharply to 1.6% (vs. 2.5% expected), mainly dragged by weaker consumption and trade deficits.
• Core PCE Inflation: Accelerated to 3.7% QoQ, raising concerns that inflationary pressures remain sticky despite cooling growth.
• Equity Markets: S&P 500 fell -0.5%, Nasdaq dropped -1.2% led by tech weakness (Tesla, Meta underperformed).
• Bond Markets: U.S. 10-year yields climbed to 4.66% as stagflation fears weighed.
• Dollar Index (DXY): Slightly firmer, ending the week near 106.

This Week

• FOMC Meeting (Wednesday): Fed expected to hold rates steady; focus will be on Powell’s tone regarding future cuts.
• Nonfarm Payrolls (Friday): Forecast at +228K; labor market resilience will be tested.
• ISM Manufacturing and Services PMI: Critical to gauge Q2 momentum.
• Apple, Amazon Earnings: Tech sector sentiment hinge.

Eurozone 🇪🇺

Last Week

• Flash CPI: Headline inflation at 2.4%, core inflation softened slightly to 2.7%.
• PMI Data: Manufacturing PMI at 45.6, indicating continued contraction; Services PMI surprisingly resilient at 52.9.
• Equities: STOXX 600 lost -0.6%, dragged by industrials and energy.

This Week

• ECB Speakers: Markets looking for confirmation of a June rate cut.
• Retail Sales, Factory Orders: Key indicators for consumer and industrial sectors.

United Kingdom 🇬🇧

Last Week

• Retail Sales (March): Fell -0.9%, worse than expectations (-0.5%), highlighting weak consumer demand.
• PMI Readings: Mixed signals, manufacturing remains weak at 48.7, services strong at 54.9.
• GBP: Gained against both USD and EUR after hawkish BoE commentary.

This Week

• Bank of England Speakers: Potential rate path clues ahead of May meeting.
• Nationwide House Price Index: Fresh view on housing market resilience.

China 🇨🇳

Last Week

• Manufacturing PMI: Slipped back into contraction at 49.2, raising concerns about the sustainability of the recovery.
• Services PMI: Also moderated slightly to 51.2.
• Equities: Shanghai Composite +0.9%, CSI 300 +1.3%, helped by state support rumors.

This Week

• Caixin Manufacturing and Services PMI: More detailed insights on private sector activity.
• Possible Stimulus Announcements: Watch for fiscal policy signals ahead of key political meetings.

Japan 🇯🇵

Last Week

• BoJ Meeting: Disappointed markets by keeping bond purchases unchanged; yen surged over 2% vs USD.
• Tokyo CPI: Headline inflation eased to 2.6%, core-core CPI at 2.2%, suggesting disinflationary trends.
• Nikkei 225: Fell -1.3%, financials underperformed sharply.

This Week

• BoJ Minutes and Follow-up Speeches: Hints at the next steps in policy normalization.
• Yen Volatility: Expected to stay high after BoJ surprise.

EMEA (Emerging Markets) 🌍

Last Week

• Turkey: CBRT kept the policy rate unchanged at 50%, signaling a pause; inflation pressures remain.
• South Africa: Rand weakened on power shortage concerns.
• Brazil: Central Bank minutes signaled a slower pace of cuts ahead.

This Week

• Turkey Inflation (Wednesday): Critical for CBRT’s policy direction.
• South Africa Trade Balance, PMI: Key economic updates.
• Brazil Industrial Production: Assessing domestic growth.

Commodities and Cryptocurrencies

Highlights:

• Gold: +2.1% on safe-haven demand amid Fed uncertainty.
• Oil: Brent fell -2.3% on rising U.S. inventories and weak China data.
• Bitcoin: Consolidated around $64,000; volatility remains subdued pre-Fed.

Best Performers:

• Gold (XAU/USD): +2.1%
• Silver (XAG/USD): +4.3%
• Ethereum (ETH/USD): +5.2%, outpacing Bitcoin in weekly returns.