The Bank of Japan will follow a soft policy course. Most company reports missed estimates

By JustMarkets 

At the close of the US stock market on Thursday, the Dow Jones Index (US30) decreased by 0.33%, and the S&P 500 Index (US500) lost 0.60%. The NASDAQ Technology Index (US100) fell by 0.80% yesterday. Sentiment for risky assets, including stocks, worsened due to recent economic data showing further weakness in manufacturing and an increase in jobless claims. The weaker data exacerbated fears of a deeper economic slowdown at a time when the Federal Reserve continues to be inclined to raise rates further.

FOMC spokeswoman Mester indicated yesterday that she was pleased with the progress made but pointed out that inflation remains too high. In Mester’s view, interest rates should move a little further into restriction territory, and the degree of further tightening depends on economic and monetary policy assessments. Philadelphia Fed President Patrick Harker warned Thursday that US interest rates are likely to rise further and stay that way longer, even if economic activity weakens. The current probability of a 0.25% rate hike at the next Fed meeting is 81%.

Tesla (TSLA) stock is down by 11% after the electric carmaker reported earnings that fell short of Wall Street expectations. The company’s margins declined because of a recent string of price cuts. Concerns about margins intensified after CEO Elon Musk announced further spending cuts to boost sales. Shares of AT&T Inc (T), a major component of the Dow Jones Index, fell more than 10% amid concerns about the company’s ability to meet its forecasts and mixed quarterly results suggesting earnings missed estimates.

Stock markets in Europe were mostly down yesterday. German DAX (DE30) decreased by 0.62%, French CAC 40 (FR40) lost 0.14%, Spanish IBEX 35 (ES35) fell by 0.46%, and British FTSE 100 (UK100) closed Thursday up by 0.05%.

ECB President Christine Lagarde hinted that the ECB would not stop fighting inflation. The March minutes of the ECB’s monetary policy meeting indicated that policymakers have not yet decided on the size of the rate hike at the next meeting, but given the latest Eurozone inflation data, there is a high probability that the ECB will raise the rate by 0.5% in May.

The French government has outlined a plan to accelerate debt reduction, which will require the government to make unpopular spending cuts. The budget deficit will be smaller than previously forecast. But it should be noted that raising the minimum retirement age by two years has greatly reduced support for the current government and strengthened opposition parties that reject budget cuts.

Oil prices fell about $2 a barrel to their lowest level since late March. Fears that a possible recession could reduce demand for fuel, as well as an increase in gasoline inventories in the US, are negative factors for oil prices.

Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.18%, China’s FTSE China A50 (CHA50) fell by 0.85%, Hong Kong’s Hang Seng (HK50) gained 0.14% on the day, India’s NIFTY 50 (IND50) added 0.03%, while Australian S&P/ASX 200 (AU200) was down by 0.04% on the day.

The Bank of Japan is eyeing the idea of changing its controversial bond yield control policy later this year but is likely to leave policy unchanged at next week’s meeting as it awaits new evidence of sustained wage growth. Kazuo Ueda will hold his first meeting as governor on April 27-28, and his appointment has heightened expectations that the bank will begin to roll back its ultra-soft settings.

S&P 500 (F) (US500) 4,129.79 −24.73 (−0.60%)

Dow Jones (US30)33,786.62 −110.39 (−0.33%)

DAX (DE40) 15,795.97 −99.23 (−0.62%)

FTSE 100 (UK100) 7,902.61 +3.84 (+0.049%)

USD Index 101.82 −0.15 −0.15%

• – Australia Manufacturing PMI (m/m) at 02:00 (GMT+3);
• – Australia Services PMI (m/m) at 02:00 (GMT+3);
• – Japan National Core Consumer Price Index at 02:30 (GMT+3);
• – Japan Manufacturing PMI (m/m) at 03:30 (GMT+3);
• – UK Retail Sales (m/m) at 09:00 (GMT+3);
• – Eurozone Manufacturing PMI (m/m) at 11:00 (GMT+3);
• – Eurozone Services PMI (m/m) at 11:00 (GMT+3);
• – UK Manufacturing PMI (m/m) at 11:30 (GMT+3);
• – UK Services PMI (m/m) at 11:30 (GMT+3);
• – Canada Retail Sales (m/m) at 15:30 (GMT+3);
• – US Manufacturing PMI (m/m) at 16:45 (GMT+3);
• – US Services PMI (m/m) at 16:45 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.