We believe the strategic case for risk assets remains favorable, with ongoing support from: 1) economic reopening and normalization, 2) fiscal support, 3) pent-up savings, and 4) historically easy financial conditions. As we move into the post-COVID-19 world, we believe the recovery will be non-linear and the opportunity set highly idiosyncratic.
US stock markets declined on news of potential tax hikes after the Biden Administration proposed nearly doubling the capital gains tax rate and raising taxes on higher incomes. The S&P 500 Index ended -0.11% lower as taxes overshadowed strong Q1 earnings reports. Similarly, other global equity markets declined as global COVID-19 cases increased. The FTSE 100 Index also sold off as British tobacco companies reacted to the US considering a nicotine cut in cigarettes sold domestically. Read More
Oil prices declined last week as global COVID-19 cases rose, heightening concerns for the recovery of consumer demand. Oil also faced headwinds as crude inventories rose by 594k barrels versus expectations of a 4,400k decline. WTI and Brent crude prices fell to $62.14 and $66.11 per barrel, respectively. Copper prices jumped 4.03% on the back of strong activity and global PMI prints. Read More
US rates continued their downward trend last week despite strong data releases, as renewed concerns around virus spread globally may have stoked demand for the haven asset. The 10-Year Treasury yield fell to 1.56%. The 10-Year German bund yield held at -0.26% as the European Central Bank (ECB) emphasized its accommodative and data-dependent policy stance. And in the UK, 10-Year Gilt yields edged down to 0.74% as the government revised down its bond sale plans after the budget deficit undershot official forecasts. Read More
The US dollar was challenged by lower Treasury yields last week as markets anticipate continued dovish commentary from the next Federal Reserve meeting on April 28. Against a basket of peers, the US dollar index fell –0.59%. The Japanese yen benefited from narrower global yield differentials, rising 107.93 USD/JPY. Read More
In March, UK core CPI rose +1.1% Year-on-Year (YoY), above consensus of 1.0% and up from 0.9% in February. The YoY increase was mostly driven by goods prices which stopped declining in March after four consecutive months in negative territory. In Japan, the national new core CPI (excl. fresh food and energy) accelerated to +0.3% YoY, in line with expectations. Read More
The ECB’s governing council kept interest rates unchanged and provided limited news. President Lagarde acknowledged recent positive macro improvement while stressing that uncertainty around the pandemic remains. Read More
Strong activity in April was evident in last week’s PMI prints, with services, manufacturing, and composite levels improving even more than consensus expected. The US saw record expansion, with composite output at 62.2, services at 60.4, and manufacturing at 57.2. The UK posted a robust 60.0 composite, with 60.1 in services and 59.1 in manufacturing. Euro area composite PMI increased to 53.7, with 50.3 in services and 63.3 in manufacturing. Read More
Initial jobless claims continued to fall, hitting a new low since the beginning of the COVID-19 pandemic at 547k for the week ending April 17. Read More
For style performance, Large, Mid, and Small refer to the Russell 1000, Russell Midcap, and Russell 2000 indices, respectively. Value refers to companies with lower price-to-book ratios and lower expected growth values, and Growth refers to higher price-to-book ratios and higher forecasted growth values. Government, Corporate, and High Yield refer to the US Treasury index, the US Corporate Credit index, and the US High Yield index, respectively. Short, Intermediate, and Long refer to the Short, Intermediate, and Long segments of their respective curves. Quality returns refers to the credit quality of asset classes ranging from Government, highest quality, to High Yield, lowest quality.
US Jobless Claims (Cons: 550k, Prior: 547k)
US Q1 GDP (Cons: 6.9%, Prior: 4.3%)
US Core PCE (Cons: 2.4%, Prior: 1.3%)
Japan IP MoM (Cons: -2.0%, Prior: -1.3%)
Euro area unemp. (Cons: 8.3%, Prior: 8.3%)
Euro area core CPI (Cons: 0.8%, Prior: 0.9%)
Euro area Q1 GDP (Cons: -0.8%, Prior: -0.7%)
“Euro PMI” refers to the Markit Eurozone Composite Purchasing Managers’ Index. “Cons. Conf.” refers to US Consumer Confidence. “GE IFO Business” refers to the German Ifo Business Climate Survey. “New Home Sales” refers to US New Home Sales (MoM). “Dur. Gd. Ord.” refers to US Durable Goods Orders. “UK GDP” refers to the QoQ estimate of the United Kingdom’s Gross Domestic Product for Q3. “Euro M3” refers to the YoY change in the Eurozone’s M3 Money Stock. “US GDP” refers to the estimate of US Gross Domestic Product for Q3. “Pers. Cons.” refers to US Personal Consumption. “UMich Cons. Sent.” refers to the University of Michigan Consumer Sentiment Index. “Japan Core-Core CPI” refers to Japan’s Consumer Price Index (ex- Food, Energy YoY).
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