Friday's Markets Update (May 10, 2024)

10 May 2024 by rate3

On Friday, stocks gave up some early gains as inflation worries and Fed caution emerged. Despite the pullback, all three major indexes are on track for a strong weekly gain. Communication services and consumer discretionary stocks did poorly, while financial and materials stocks performed well. Globally, EU stocks surged to ATH on ECB rate cut expectations, while gold and the dollar rose on renewed geopolitical tensions and negative Fed comments. BTC tumbled again, closing around 60K, with ETH dipping below 2.8K and nearing its 200-day moving average on a daily graph. The crypto market turned red, with Chainlink, Uniswap, and Bitcoin Cash decreasing by up to 4-6%.

Details

Consumer confidence plunged in May to a six-month low (67.4) on worries about rising inflation (3.5% expected year-ahead), potentially higher interest rates, and unemployment. Both current economic views and future expectations fell sharply. (SCA)

Crypto

Crypto nonprofit Stand With Crypto has launched a PAC to support pro-crypto politicians in the 2024 elections. The organization aims to raise funds from its 440Th members to back a bipartisan group of candidates. (source)

World Markets

ECB minutes show growing support for rate cuts due to falling inflation forecasts, especially with lower energy prices. However, concerns linger about domestic price pressures and the need for more data. A clearer picture by June's meeting will be crucial for deciding the path forward.
Brazil's inflation dropped to a 10-month low of 3.69% in April, closer to the central bank's target of 3.5%. This trend suggests the possibility of further interest rate cuts, despite rising fuel costs. (Ibge)
India's industrial growth came in at 4.9% in March, missing expectations. Still, manufacturing rose 5.2%, driven by strong gains in metals, electronics, transportation equipment, and furniture. Mining and electricity output also increased.
Italy's industrial production fell 3.5% in March compared to the previous year. This is despite a long-term average of 0.07% growth, with a previous high of 80.1% in April 2021 and a low of -43.7% in April 2020. (ISTAT)

Currencies

Dollar rose this week (up 0.3%) despite expectations of Fed rate cuts. Consumer confidence is low due to inflation fears, and jobless claims jumped. Fed officials remain cautious about cutting rates, but markets still see cuts coming later this year (odds suggest a 62% chance of a rate cut in September and 75% in November). Elsewhere, rate cuts are likely in both Britain (BoE) and Europe (ECB).
The offshore yuan dipped to 7.22 due to trade restrictions and worries about a cooling US economy. Washington added 37 Chinese firms to a blacklist, while investors wait for China's inflation data and clues about US rate cuts after a jump in jobless claims.

Commodities

Gold surged past $2,350, its highest level since April 19th. This jump reflects investor bets on a Fed rate cut in September due to signs of a slowing US jobs market. Next week's inflation data will be key for confirming the Fed's stance. Gold's rise comes after months of gains fueled by strong investment and geopolitical jitters.
Oil prices fell by more than 1% to 78 USD, as worries about high interest rates and weak US consumer confidence overshadowed signs like rising Chinese demand and tensions in the Middle East.
Steel rebar prices in China plunged to a one-month low, hurt by weak domestic demand and a property market slump (new home sales from China’s 100 biggest developers decreased by 45% annually in April). CPC acknowledged the crisis and vowed to control oversupply, further dampening construction prospects. Steel mills, facing overcapacity, flooded foreign markets despite lower prices and trade investigations.

On Week 12, investors will be waiting for inflation, retail sales, and Fed talks. Earnings reports from giants like Walmart and Home Depot are also on tap. China's industrial output and retail sales data will be watched alongside global GDP figures from Japan and Russia. Inflation in India and business confidence in Australia round out the busy week.