𝙇𝙖𝙨𝙩 𝙬𝙚𝙚𝙠 𝙬𝙚 𝙨𝙖𝙬 𝙖 𝙥𝙖𝙧𝙩𝙞𝙖𝙡 𝙧𝙚𝙣𝙚𝙬𝙖𝙡 𝙤𝙛 𝙩𝙝𝙚 𝙂𝙧𝙤𝙬𝙩𝙝-𝙩𝙤-𝙑𝙖𝙡𝙪𝙚 𝙧𝙤𝙩𝙖𝙩𝙞𝙤𝙣 𝙩𝙧𝙖𝙙𝙚. 𝙏𝙚𝙘𝙝𝙣𝙤𝙡𝙤𝙜𝙮 𝙨𝙩𝙤𝙘𝙠𝙨 𝙘𝙡𝙚𝙖𝙧𝙡𝙮 𝙪𝙣𝙙𝙚𝙧𝙥𝙚𝙧𝙛𝙤𝙧𝙢𝙚𝙙. 𝙄𝙣𝙛𝙡𝙖𝙩𝙞𝙤𝙣 𝙙𝙖𝙩𝙖 𝙬𝙚𝙧𝙚 𝙘𝙡𝙪𝙚 𝙩𝙤 𝙩𝙝𝙚 𝙬𝙤𝙗𝙗𝙡𝙚𝙨 𝙖𝙣𝙙 𝙧𝙚𝙣𝙚𝙬𝙚𝙙 𝙛𝙚𝙖𝙧𝙨 𝙞𝙣 𝙩𝙝𝙖𝙩 𝙧𝙚𝙨𝙥𝙚𝙘𝙩. 𝘾𝙚𝙣𝙩𝙧𝙖𝙡 𝙗𝙖𝙣𝙠𝙨 𝙠𝙚𝙚𝙥 𝙩𝙝𝙚 𝙨𝙩𝙖𝙣𝙘𝙚 𝙩𝙝𝙖𝙩 𝙘𝙪𝙧𝙧𝙚𝙣𝙩 𝙔𝙤𝙔 𝙙𝙮𝙣𝙖𝙢𝙞𝙘𝙨 𝙞𝙣 𝘾𝙋𝙄 𝙖𝙧𝙚 𝙩𝙚𝙢𝙥𝙤𝙧𝙖𝙧𝙮 𝙙𝙪𝙚 𝙩𝙤 𝙫𝙚𝙧𝙮 𝙡𝙤𝙬 𝙗𝙖𝙨𝙚 𝙛𝙧𝙤𝙢 𝙡𝙖𝙨𝙩 𝙮𝙚𝙖𝙧 𝙖𝙙𝙣 𝙬𝙞𝙡𝙡 𝙛𝙖𝙙𝙚. 𝙏𝙝𝙚 𝙢𝙖𝙧𝙠𝙚𝙩 𝙝𝙖𝙨 𝙖 𝙢𝙪𝙘𝙝 𝙢𝙤𝙧𝙚 𝙢𝙞𝙭𝙚𝙙 𝙫𝙞𝙚𝙬 𝙞𝙣 𝙩𝙝𝙖𝙩 𝙧𝙚𝙨𝙥𝙚𝙘𝙩.
Yields are wider again due to inflation. The reading in US for April showed a 4,2% yoy rise in CPI and a 3% YoY rise in Core CPI. Both numbers were much above market expectations, which lead to renewed worries that inflation will become a persistent problem going forward. The Fed speakers downplayed the numbers and underlined they plan to keep their policy stance. Nasdaq naturally was the index that was most negatively influenced.
𝗟𝗮𝘀𝘁 𝘄𝗲𝗲𝗸
👉 The pressure on tech stocks started already on Monday, yet before the inflation data did the bad job. Nasdaq Composite was down 2,5% to start the week. Famous Ark Innovation ETF run by Cathie Wood fell to its lowest level since November 2020. FANGs were all down 2-6% across the board.
👉 On Tuesday the market looked to continue the same trade, but intraday Nasdaq regained an early 2% loss, whilst $DJ30 stayed under pressure – hmmm. VIX also jumped Mo-Wed, but is still in low 20’s range, so the readacross is still that we’re seeing the market digest a new situation (higher inflation), rather that break and fall apart (in which case VIX would rather be in the 40’s or higher).
👉 Wednesday was naturally bad because of the inflation data described above. Indices were down 2-3% broadly. That kind of headlines were plenty: “The reaction in equities raised concerns that the Fed is wrong about rising prices being temporary. If the central bank is incorrect about transitory inflation, market professionals fear it could begin to unwind its easy policies faster than expected and ultimately raise interest rates.” (CNBC) – I’d rather listen to the Fed in the long run.
👉 On Thursday and Friday the equity markets managed to digest the inflation data and regain much of the earlyweek losses. PPI data in thursday were more modest and closer to expectations than CPI, which also helped reign in volatility.
👉 Europe was calmer that US and Japan last week. YTD US and EU are up 11-12%, Japan is lagging quite a bit (up 2% YTD) and technology is behind broad market (Nasdaq up 4,2% YTD).
👉 𝙀𝙛𝙛𝙚𝙘𝙩𝙞𝙫𝙚 𝙬𝙚𝙚𝙠𝙡𝙮 𝙞𝙣𝙙𝙚𝙭 𝙘𝙝𝙖𝙣𝙜𝙚𝙨: $SPX500 -1,4%, $NSDQ100 -2,4%, EuroStoxx600 -0,5%, $GER30 +0,1%, JPN225 -4,3%.
𝗢𝘁𝗵𝗲𝗿 𝗺𝗮𝗿𝗸𝗲𝘁𝘀 𝗲𝘃𝗲𝗻𝘁𝘀: 👉 𝘽𝙤𝙣𝙙𝙨: the US yield curve (10y-FF) at 161bps, the German curve (10Y Bunds-3M) quite a bit wider at 50 bps. EuroArea AAA-rated bonds yield at 56bps – also wider. High Yield Spreads at 3,3. 👉 𝘾𝙤𝙢𝙢𝙤𝙙𝙞𝙩𝙞𝙚𝙨 (𝙚𝙭 𝙤𝙞𝙡): $GOLD +1,6% 👉 𝙊𝙞𝙡: +1,1% on week. 👉 𝘾𝙪𝙧𝙧𝙚𝙣𝙘𝙞𝙚𝙨: DXY (Dollar Index) +0,1% on week, EURUSD -0,1%.
Best, GlobalAlphaS
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