Equities Slip as Treasury Yields Rise on Strong Macro Data

Equity markets lost ground last week, reflective of an uptick in sovereign yields following strong economic data in the US. Purchasing Manager Index (PMI) data from the Institute for Supply Management (ISM) revealed a notable improvement by the manufacturing sector, smashing expectations and returning to growth for the first in sixteen months[1]. A solid jobs report on Friday which revealed another strong month of job creation during March added to concerns around if and when the Federal Reserve (Fed) will actually begin to cut interest rates. The S&P 500 declined by -1.0% (in US dollar terms), pulling back from the record high set a week earlier.

Other equity markets took lead from their American counterparts with European indices also concluding the week lower. The MSCI Europe ex UK index ended ten straight weeks of gains with a -1.3% fall whilst across the Channel, the FTSE 100 and FTSE 250 declined by -0.5% and -0.8% respectively. The fall in mainland European equities occurred despite the latest CPI inflation print coming in below expectations at 2.4%[2]. Moving to Asia, the Nikkei 225 in Japan retreated sharply, posting a weekly decline of -3.4%. Growing speculation that the Finance Ministry may step in to prop up the ailing Yen was an added headwind; the weakness in the currency over the past few years has been a major boost for local equity markets. One index to advance last week was the Shanghai Composite in China which rose by +0.9% (local currency) in what was a holiday shortened trading week.

In commodity markets, oil prices continued to rise with Brent Crude jumping by a further +4.7% to $91.55 a barrel. A combination to tight global supplies and persistent nervousness around the Middle East underpinned last week’s advance with prices pushed up to their highest levels since October. Gold prices also continued to surge, a jump of +4.9% pushing the precious metal to $2,323 an ounce. Regarding copper, the metal exceeded the rally seen in the gold market with a weekly gain of +5.0%. Supply worries helped the metal to reach its highest point for twelve months.

Week Ahead

Day	Country	Measure	Period	Forecast	Previous
Monday	N/A	-	-	-	-
Tuesday	UK	BRC Retail Sales YoY	March	1.80%	1.00%
Wednesday	US	CPI Inflation YoY	March	3.40%	3.20%
Thursday	China	CPI Inflation YoY	March	0.40%	0.70%
	China	PPI Inflation YoY	March	-2.80%	-2.70%
	Europe	European Central Bank Policy Meeting	April	-	-
Friday	China	Exports YoY	March	-2.50%	7.10%
	China	Imports YoY	March	1.40%	3.50%
	UK	GDP MoM	February	0.10%	0.20%
	UK	Manufacturing Production MoM	February	0.20%	0.00%
	US	University of Michigan Consumer Sentiment	April	79.00	79.40

Source: Refinitiv Workspace, 08/04/24

[1] T. Rowe Price – Global Markets Weekly Update, 05/04/24

[2] Eurostat – CPI Inflation, March 2024

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