In The Spotlight
In The Spotlight
In The Spotlight
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S&P 500 Index earnings printed better than feared in 1Q, with both sales and earnings exceeding consensus forecasts. The level of expected profit margins rose in 9 of the 11 sectors, reflecting the first sequential increase in margins in over a year, and is now back at pre-COVID levels. Slowing economic growth remains a downside risk to margins, though we believe resilient revenues and slowing input cost inflation will be supportive of earnings in coming quarters.
US equities ended the week higher, as many investors demonstrated optimism for a debt ceiling resolution ahead of the House vote. Concerns over additional rate hikes resurfaced, as initial jobless claims fell more than consensus expected, indicating a still tight labor market. Ultimately, the S&P 500 ended up 1.71%. In Europe, first quarter earnings results printed above consensus expectations, driving the Euro Stoxx 600 and FTSE 100 0.85% and 0.20% higher, respectively. Read More
Oil prices rose last week, as the IEA raised its estimate for global oil demand due to increased China consumption. In fact, global oil demand hit the highest level on record in March, rising 3.0 mb/d MoM, driven by rising demand from both China and the US. Ultimately, WTI and Brent crude closed higher at $71.55 and $75.58/bbl, respectively. Read More
Last week, US Treasury yields increased on the back of stronger manufacturing data than consensus expected and optimism surrounding US debt ceiling negotiations, both of which contributed to risk-on sentiment. Fed Chairman Powell’s comments on whether interest rates need to rise further caused yields to ease, though ultimately the 2-Year and 10-Year US Treasury yields closed the week higher to 3.69% and 4.29%, respectively. This risk-on sentiment also translated across the ocean, with the 10-Year German Bund and UK Gilt yields rising to 2.43% and 4.00%, respectively. Read More
Last week, the US dollar strengthened, appreciating 0.45% against a basket of currencies following optimism a bipartisan deal will be reached to raise the debt ceiling and improving labor market data. In Europe, the euro closed lower at $1.0808 on the back of ECB commentary indicating that tightening is nearing its final stages. Read More
In the US, retail sales increased 0.4% in April, less than consensus expectations. The figure reflected a surprise decline in gasoline sales but was balanced by a larger increase in core retail sales. Meanwhile, industrial production increased 0.5% in April, above consensus expectations as auto production rose. Similarly, housing starts increased by 2.2% in April, against consensus expectations for a 1.4% decline. The composition was strong, as both single-family and multi-family starts increased. Lastly, the Philly Fed manufacturing index increased by more than expected in May, as the new orders and shipments components rose. In China, last week’s releases showed softer data in April, after a strong first quarter. Industrial output, investment, and retail sales all missed expectations in April, generally showing weak or negative sequential growth. Read More
Initial jobless claims fell by 22k to 242k in the week ended May 13, below consensus expectations. The four-week moving average of claims, which smooths out volatility, fell by 1k to 244k. In the UK, the March labor market report showed further rebalancing in the labor market with the unemployment rate edging up to 3.9%, 0.4 pp above last summer’s trough. However, growth in basic pay came in higher at 6.7% suggesting continued wage pressures. Read More
In Japan, Q1 GDP growth estimate came in at +1.6% QoQ annualized, well above the consensus estimate of +0.8%. The positive surprise was primarily driven by consumption and capital expenditures. Additionally, Japan CPI ex. fresh food & energy rose +4.1% YoY in April, adding renewed pressures to the Bank of Japan to normalize currently easy policy. Read More
For US Fixed Income, Government, Corporate, and High Yield refer to the Bloomberg US Treasury, the Bloomberg US Corporate Credit, and the Bloomberg US High Yield indices, respectively. For European Fixed Income, Government, Corporate, and High Yield refer to the Bloomberg Euro Treasury Index, the Bloomberg Euro Corporate Index, and the Bloomberg Euro 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. Since August 24, 2016, the Barclays indices are co-branded “Bloomberg Barclays indices”.
US Services PMI (Cons: 52.6, Prior: 53.6)
Euro area Manufacturing PMI (Cons: 46.2, Prior: 45.8)
Euro area Services PMI (Cons: 55.6, Prior: 56.2)
UK CPI (Cons: 8.3%, Prior: 10.1%)
US GDP (Cons: 1.1%, Prior: 2.6%)
US Initial Jobless Claims (Cons: 250k, Prior: 242k)
US Core PCE (Cons: 0.3%, Prior: 0.3%)
US Personal Spending (Cons: 0.4%, Prior: 0.0%)
UK Retail Sales (Prior: 0.4%, Prior: –0.9%)
“YoY” refers to year-over-year. “MoM” refers to month-over-month. “QoQ” refers to quarter-over-quarter. “US Services PMI” refers to the Markit US Services Purchasing Managers’ Index. “UK CPI YoY” refers to the United Kingdom’s Consumer Price Index, year-over-year. “UK PPI YoY” refers to the US Producer Price Index, year-over-year. “GDP” refers to gross domestic product. “FOMC” refers to Federal Open Market Committee. “ECB” refers to European Central Bank. “BoJ” refers to the Bank of Japan. “BoE” refers to the Bank of England.
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