“Credit standards are tightening, thereby freezing out borrowers”
By Elliott Wave International
Recent headlines about the U.S. economy are rosy:
US economic growth for last quarter is revised up slightly to a healthy 3.4% annual rate (AP News, March 28)
US economy continues to shine with help from consumers, labor market (Reuters, March 28)
It’s all well and good to announce positive economic news. Yet, consumers of such news may not be getting the full story.
In other words, there’s plenty of less-than-positive economic developments, and I’ll point out just three which portend a possible economic contraction.
The first one has been well-advertised: the developing commercial real estate crisis. In a nutshell, office building owners face higher interest rates as their loans mature. This could set off a wave of defaults. Indeed, there’s already been a dramatic rise in the number of U.S. commercial property foreclosures in the past four years.
Another sign of a developing economic slowdown has to do with consumers. If you live in the U.S., quite a few of your neighbors — or at least residents of your community — are tapped out.
Here’s a chart from the March Elliott Wave Financial Forecast, a monthly publication which covers major U.S. financial markets:
As you can see, credit card delinquencies have been rising since 2022. Indeed, credit card arrears are higher than they’ve been since the wake of the Great Recession in 2007-2009.
And speaking of the Great Recession, sub-prime car loan delinquencies are even higher than they were then.
The March Elliott Wave Financial Forecast elaborates with this chart and commentary:
Car loan delinquencies are higher than at any time in the data’s history, which goes back to 1996. … Credit standards are tightening, thereby freezing out borrowers. … Access to auto credit is the lowest in nearly four years.
Also keep in mind that the economy follows the stock market.
If the stock market goes into a correction — or worse — expect the economy to weaken. History shows that there’s usually a few months lag time between the action of the stock market and economy.
Elliott wave analysis can help you get a handle on the stock market’s trend.
If you’re unfamiliar with the Elliott wave method, read Frost & Prechter’s Wall Street classic, Elliott Wave Principle: Key to Market Behavior. Here’s a quote from the book:
All waves are of a specific degree. Yet it may be impossible to identify precisely the degree of developing waves, particularly subwaves at the start of a new wave. Degree is not based upon specific price or time lengths but upon form, which is a function of both price and time. Fortunately, the precise degree is usually irrelevant to successful forecasting since it is relative degree that matters most. To know a major advance is due is more important than its precise name. Later events always clarify degree.
Get more insights into the Wave Principle by reading the entire online version of the book.
This article was syndicated by Elliott Wave International and was originally published under the headline 3 Signs of Developing U.S. Economic Slowdown. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
At Thursday’s close, the Dow Jones Index (US30) was up 0.06%, while the S&P 500 Index (US500) decreased by 0.22%. The NASDAQ Technology Index (US100) closed positive 0.1% yesterday. A rise in T bond yields on Thursday pressured stocks. Hawkish comments from the Federal Reserve pushed bond yields up and pressured stock indices when New York Fed President Williams and Atlanta Fed President Bostic said the Fed would not rush to cut interest rates. In addition, weakness in chip company stocks weighed on the overall market for the second session. Stocks found some support from Thursday’s US economic reports, which were mostly better than expected and bolstered the outlook for a soft landing.
The US weekly jobless claims were unchanged at 212,000, indicating a robust labor market. The Philadelphia Fed Business Outlook Index for April unexpectedly rose by 12.3 to a 2-year high of 15.5 vs. expectations of a decline to 2.0. The US home sales for March fell by 4.3% m/m to 4.19 million, slightly weaker than expectations of 4.20 million.
Tesla (TSLA) shares fell more than 3% and topped the NASDAQ (US100) losers list after Deutsche Banks downgraded the stock to “hold” from “buy.” Meta Platforms (META) is up more than 1% and led the NASDAQ (US100) risers after Moody’s Ratings Services upgraded the company’s senior unsecured debt rating to Aa3 from A1.
Geopolitical risks in the Middle East remain a negative factor for risk assets. On Friday morning, Israel retaliated against Iran following Tehran’s attack over the weekend. Notably, the attack was carried out on the birthday of Iranian leader Khamenei, who turns 85 today.
Bitcoin briefly dipped below the $60,000 mark on Friday before stabilizing around $61,000, hitting its lowest level in six weeks. Financial markets were swept by a wave of risky trades following reports that Israel had struck targets in Iran, Iraq, and Syria in response to Tehran’s attack on Israel over the weekend. Meanwhile, some analysts have argued that Bitcoin and other crypto-assets could provide an alternative store of value in times of geopolitical and economic uncertainty.
Equity markets in Europe were mostly up on Thursday. Germany’s DAX (DE40) added 0.38%, France’s CAC 40 (FR40) closed up 0.52%, Spain’s IBEX 35 (ES35) rose by 1.23%, and the UK’s FTSE 100 (UK100) closed positive 0.37%.
Eurozone construction output rose by 1.8% m/m in February, the largest increase in a year. In their monthly report, the Bundesbank upgraded their assessment of the German economy and said that a “slight increase” in growth is possible in Q1, an improvement from March when they forecast the economy to contract in Q1. ECB executive board spokesman de Guindos said yesterday that if there is increased confidence among ECB officials that the 2% inflation target will be met, reducing the current level of monetary policy restriction would be appropriate. His counterpart, ECB Governing Council spokesman Holzmann, said a majority vote in June would likely favor an ECB rate cut.
WTI crude futures jumped about 2% above $84 a barrel on Friday, recovering most of the losses suffered earlier in the week following reports of large explosions in Iran, Iraq, and Syria suspected to have been attacked by Israel. The reimposition of US sanctions on Venezuelan oil and potential new EU restrictions on Iran will continue to drive oil markets higher.
Asian markets were predominantly rising yesterday. Japan’s Nikkei 225 (JP225) added 0.13%, China’s FTSE China A50 (CHA50) rose by 0.52%, Hong Kong’s Hang Seng (HK50) gained 0.03%, while Australia’s ASX 200 (AU200) was negative 0.40%.
Malaysia’s economy grew 3.9% year-on-year in the first quarter of 2024, accelerating from the 3.0% growth in the previous period. This is the economy’s fastest growth in a year, driven by positive contributions from all sectors, led by the services sector (4.4% vs. 4.2% in Q4).
In a trilateral statement, the US, Japan, and South Korea said they will continue close consultations on currency market developments, recognizing the serious concerns of Japan and Korea about the recent sharp depreciation of their currencies. In its semi-annual report on the financial system, the Bank of Japan noted that financial conditions at companies are improving, and companies are generally quite resilient to stress. Many Japanese companies have sufficient profitability to withstand rising interest rates. Swaps estimate the odds of a 10 bps rate hike by the BoJ at 1% for the April 26 meeting and 39% for the next meeting on June 14.
S&P 500 (US500) 5,011.12 −11.09 (−0.22%)
Dow Jones (US30) 37,775.38 +22.07 (+0.058%)
DAX (DE40) 17,837.40 +67.38 (+0.38%)
FTSE 100 (UK100) 7,877.05 +29.06 (+0.37%)
USD Index 105.86 -0.09 (-0.09%)
Important events today:
– Japan National Core Consumer Price Index at 02:30 (GMT+3);
– UK Retail Sales (m/m) at 09:00 (GMT+3);
– German Producer Price Index (m/m) at 09:00 (GMT+3).
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.
At Monday’s close, the Dow Jones Index (US30) decreased by 0.12%, while the S&P 500 Index (US500) was down 0.58%. The NASDAQ Technology Index (US100) closed yesterday negative 1.15%. A drop in chip company stocks negatively impacted the overall market on Wednesday after ASML Holding NV reported first-quarter net sales below consensus. Geopolitical risks in the Middle East continue to weigh on equities amid concerns that Israel will retaliate after Iran fired a barrage of missiles and drones at Israel over the weekend.
Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) added 0.02%, France’s CAC 40 (FR40) closed up 0.62%, Spain’s IBEX 35 (ES35) rose by 1.02%, and the UK’s FTSE 100 (UK100) closed positive 0.35% on Wednesday. European equity markets opened higher on Thursday amid improving risk sentiment, while investors ignored another tech-driven sell-off on Wall Street.
Several ECB officials made statements yesterday. Cipollone of the ECB executive board said that if incoming data confirms that inflation is returning to the 2% target, removing some of the restrictive measures introduced in 2023 would be appropriate. This view was also supported by the representative of the ECB’s Governing Council, Centeno. He added that it was time for the ECB to change monetary policy due to weak economic growth and progress on disinflation. But there was a counter-argument from ECB Governing Council spokesman Holzmann, who said he was not fully convinced that the ECB should start cutting interest rates in June, citing the results of the Eurozone wage debate and rising tensions in the Middle East, which poses risks to inflation.
WTI crude prices held below $83 a barrel on Thursday, having lost more than 3% in the previous session, amid signs that US oil supply remains strong and demand is rising. EIA data showed that US crude inventories rose by 2.735 million barrels last week, increasing for the fourth week and beating market expectations for a 1.6 million barrel increase. Meanwhile, the US said it would reimpose oil sanctions against Venezuela in response to President Nicolas Maduro’s failure to fulfill his campaign pledges. European Union leaders also discussed new restrictions on Iran following its attack on Israel over the weekend. Any restrictions will keep oil prices from falling.
The US natural gas prices fell more than 3.5% to below $1.7 per MMBtu, the lowest in two months, due to a sharp decline in gas going to LNG export plants and a large surplus in storage. In addition, gas inventories are expected to be 36% above the seasonal average due to a combination of high initial inventory levels and a mild winter.
Asian markets traded without a single dynamic yesterday. Japan’s Nikkei 225 (JP225) was down 1.32%, China’s FTSE China A50 (CHA50) was up 0.79%, Hong Kong’s Hang Seng (HK50) added 0.02%, and Australia’s ASX 200 (AU200) was negative 0.09%.
On Wednesday, China’s central bank said it will maintain a cautious monetary policy and ensure the efficient utilization of financial resources. It added that the authorities will ensure that the yuan’s movement is mainly driven by supply and demand. Meanwhile, economists forecast that China’s central bank will cut the RRR by 25 bps in Q3 2024 after it cut the rate by 50 bps earlier this year, the biggest cut in 2 years.
Australia’s labor market report came out mixed. Australia’s seasonally adjusted unemployment rate rose to 3.8% in March 2024 from February’s five-month low of 3.7% but below market forecasts of 3.9%. The number of unemployed increased by 20.6 thousand to 569.9 thousand, while those looking for work rose by 19.3 thousand to 371.3 thousand.
S&P 500 (US500) 5,022.21 −29.20 (−0.58%)
Dow Jones (US30) 37,735.11 −45.66 (−0.12%)
DAX (DE40) 17,770.02 +3.79 (+0.021%)
FTSE 100 (UK100) 7,847.99 +27.63 (+0.35%)
USD Index 105.86 -0.09 (-0.09%)
Important events today:
– Australia Unemployment Rate (m/m) at 04:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
– US Philadelphia Fed Manufacturing Index (m/m) at 15:30 (GMT+3);
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.
Geopolitical risks, key economic data, and big bank earnings have made this an eventful week for markets.
And we could see more action as anticipation mounts ahead of the upcoming Bitcoin halving.
Here are how these discussed instruments performed this week:
1) Cocoa hits all-time high
Where and when was Target Price (TP) published?
It was another week another all-time high for FXTM’s new commodity – Cocoa.
However, we cautioned that a “technical throwback could be in the works…with key support at $10717, $10485…)
Note: A technical throwback is when prices slip back towards a breakout level after breaking resistance.
What happened since TP was published?
After hitting an all-time high at $11345.56 on Monday, prices tumbled over 8% on Tuesday amid profit taking and concerns over global demand negatively impacted by record cocoa prices.
How much in potential profits?
Traders who entered at Monday’s closing price around $11120 and exited at the $10485 support level would have caught a 5.7% move to the downside.
“Prices seem to be under pressure following the sharp selloff witnessed on Saturday. Should $65000 prove to be reliable resistance, this could trigger a selloff towards $61500 and $60000.”
What happened since TP was published?
Bitcoin along with other altcoins were hit by escalating geopolitical tensions in the Middle East.
The “OG” crypto dropped below $60,000 for the first time in more than a month amid profit-taking and risk aversion.
Note: The upcoming halving is a significant event for the crypto space and spark volatility.
How much in potential profits?
A whopping 50,000 points for traders who shorted Bitcoin from the $65000 level.
3) USDCHF hits all bearish targets
Where and when was Target Price (TP) published?
This technical scenario (USDCHF) is based on the FXTM Signals that are posted twice a day (before the London and New York sessions) for all FXTM clients to follow.
At Monday’s close, the Dow Jones Index (US30) added 0.17%, while the S&P 500 Index (US500) was down 0.21%. The NASDAQ Technology Index (US100) closed negative 0.12% yesterday. The Fed’s hawkish comments on Tuesday pushed 10-year T-note yields to a 5-month high and negatively impacted equities. The US Fed Chairman Jerome Powell said yesterday that given the strength of the labor market and progress on inflation so far, it is appropriate to give restrictive policy additional time to work. In addition, Fed Vice Chairman Jefferson added that if incoming data indicate that inflation is more resilient, it would be appropriate to maintain the current restrictive policy for a longer period. Currently, markets expect only 40 basis points of easing from the Fed this year, down significantly from 160 basis points at the beginning of the year. Markets are pricing in the chances of a rate cut of 25 bps. Up to 3% will be at the next FOMC meeting on May 1, and 20% will be at the June 12 meeting.
Geopolitical risks in the Middle East continue to weigh on equities amid concerns that Israel will retaliate after Iran fired a barrage of rockets and drones at Israel over the weekend. Israel’s military cabinet postponed a meeting scheduled for Tuesday to decide on retaliatory measures.
The International Monetary Fund raised its 2024 global GDP forecast to 3.2% from its January forecast of 3.1%.
Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) fell by 1.44%, France’s CAC 40 (FR40) closed down 1.40%, Spain’s IBEX 35 (ES35) lost 1.50%, and the UK’s FTSE 100 (UK100) closed negative 1.82% on Tuesday.
German economic growth expectations in the ZEW survey rose by 11.2 to a two-year high 42.9, beating expectations of 35.5. ECB President Lagarde said yesterday that unless there are major shocks to developments, the ECB is approaching a point where the bank will have to moderate its restrictive monetary policy. Lagarde also added that this will likely happen in a fairly short period. ECB Governing Council representative Makhlouf provided more specificity, saying that the ECB could cut interest rates at its next meeting in June if the upward trend in inflation continues. Swaps put the odds of a 25 bps ECB rate cut at its next meeting on June 6 at 87%.
WTI crude futures fell as low as $85 a barrel on Wednesday, declining for the third consecutive session. Economic uncertainty in China, a major oil importer, and a delayed US interest rate cut weighed on the demand outlook. However, given tensions in the Middle East and considering OPEC+ production cuts, the overall fundamental backdrop points to further gains in oil prices.
Asian markets were predominantly down yesterday. Japan’s Nikkei 225 (JP225) was down 1.94%, China’s FTSE China A50 (CHA50) lost 0.40%, Hong Kong’s Hang Seng (HK50) decreased by 2.12% and Australia’s ASX 200 (AU200) was negative 1.81%.
The New Zealand dollar rose to $0.59 after data showed that the country’s inflation rate eased to 4% y/y in the first quarter, the lowest since June 2021. The reading matched economists’ expectations but exceeded the Reserve Bank of New Zealand’s (RBNZ) forecast of 3.8% y/y. Earlier this month, the RBNZ kept the rate unchanged for the sixth consecutive meeting as policymakers sought to further ease capacity and inflation pressures despite data pointing to weakening economic activity.
Japan posted a trade deficit for the third consecutive fiscal year as the cost of energy and other imported goods rose and the yen remained weak.
Westpac forecasts Australian GDP growth to remain modest at 1.6% in 2024, down from a soft 1.5% a year earlier. This is well below Australia’s “trend” growth rate of around 2.5%.
S&P 500 (US500) 5,061.82 −61.59 (−1.20%)
Dow Jones (US30) 37,735.11 −248.13 (−0.65%)
DAX (DE40) 18,026.58 +96.26 (+0.54%)
FTSE 100 (UK100) 7,965.53 −30.05 (−0.38%)
USD Index 106.35 +0.14 (+0.13%)
Important events today:
– New Zealand Consumer Price Index (q/q) at 01:45 (GMT+3);
– Japan Trade Balance (m/m) at 02:50 (GMT+3);
– UK Consumer Price Index (m/m) at 09:00 (GMT+3);
– UK Producer Price Index (m/m) at 09:00 (GMT+3);
– Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
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.
At Monday’s close, the Dow Jones (US30) Index decreased by 0.65%, while the S&P 500 (US500) Index was down 1.20%. The NASDAQ Technology Index (US100) closed yesterday negative at 1.79%. The US dollar initially declined on Monday amid lower liquidity demand, as stocks rose after geopolitical concerns eased amid hopes that diplomatic efforts would curb the conflict between Iran and Israel. However, the US dollar jumped sharply in the US session after March, and US retail sales rose more than expected, a hawkish factor for Fed policy. In addition, the inability of equities to hold on to the early rally caused additional liquidity demand for the dollar. That said, last night, Israel’s defense minister said that Israel has no choice but to retaliate against Iran for its drone missile attack on Israel over the weekend.
Salesforce (CRM) shares fell more than 7%. They topped the list of losers in the S&P 500 and Dow Jones Industrials following a Bloomberg report that the company is interested in acquiring Informatica, which analysts say could attract regulatory attention. Atlassian (TEAM) slid more than 7% and topped the list of losers in the Nasdaq 100 after Mizuho Securities cut its price target on the company’s shares to $240 from $265. Tesla (TSLA) closed down more than 5%, topping the Nasdaq 100 losers list, after CEO Musk said the company will cut its global workforce by more than 10% as demand for electric vehicles slows.
Equity markets in Europe mostly went up yesterday. Germany’s DAX (DE40) rose by 0.54% (up -1.28% on the week), France’s CAC 40 (FR40) closed higher by 0.43%, Spain’s IBEX 35 (ES35) closed at its opening price, and the UK’s FTSE 100 (UK100) closed negative 0.38% on Monday. European stock markets opened lower on Tuesday as strong US retail sales data reinforced expectations that the Federal Reserve will postpone interest rate cuts. Investors are also keeping a close eye on developments in the Middle East amid concerns that an Iranian attack on Israel over the weekend could lead to a wider conflict in the region.
The latest data showed an unexpected increase in the UK unemployment rate to 4.2%, exceeding expectations of 4.0%, while wage growth slowed gradually. Traders adjusted their forecasts for the Bank of England and the Federal Reserve to cut interest rates this year, driven by strong US inflation figures. The Bank of England rate is expected to fall to 4.75% by the end of 2024 from the current 5.25%, a significant change from the previous forecast that suggested a rate cut to 4.5% by December.
WTI crude oil prices rose to around $86 a barrel on Tuesday, reversing losses from the previous session as investors await Israel’s response. Israel’s military chief said his country would respond to the attack, with reports suggesting they were targeting key targets in Iran. Iran is a leading OPEC member, producing more than 3 million barrels of crude oil daily.
Asian markets were predominantly down. Japan’s Nikkei 225 (JP225) was down 0.65% yesterday, China’s FTSE China A50 (CHA50) was up 2.7%, Hong Kong’s Hang Seng (HK50) lost 0.99% yesterday, and Australia’s ASX 200 (AU200) was negative 0.75%.
Asian stocks fell sharply on Tuesday, following an overnight decline on Wall Street amid lingering concerns over geopolitical tensions in the Middle East and a longer-term interest rate hike in the US. However, losses in Chinese stocks were slightly less than their peers as gross domestic product (GDP) data showed the country’s economy grew more than expected in the first quarter. China’s economy grew 5.3% y/y in the first quarter of 2024, exceeding market forecasts of 5.0% and following 5.2% growth in the previous period. This was the sharpest annual growth since Q2 2023, helped by continued supportive measures from Beijing, while the Lunar New Year festival also boosted consumer spending. Fixed asset investment rose by 4.5% in the first three months of the year, the highest in three years and above the consensus forecast of 4.3%. Meanwhile, March data showed that industrial production and retail sales rose less than expected, underscoring the need for further policy easing for the economy. At the same time, the unemployment rate came in at 5.2% in March, remaining near February’s 7-month high of 5.3%.
S&P 500 (US500) 5,061.82 −61.59 (−1.20%)
Dow Jones (US30) 37,735.11 −248.13 (−0.65%)
DAX (DE40) 18,026.58 +96.26 (+0.54%)
FTSE 100 (UK100) 7,965.53 −30.05 (−0.38%)
USD Index 106.35 +0.14 (+0.13%)
Important events today:
– China GDP (q/q) at 05:00 (GMT+3);
– China Industrial Production (y/y) at 05:00 (GMT+3);
– China Unemployment Rate (m/m) at 05:00 (GMT+3);
– China Retail Sales (m/m) at 05:00 (GMT+3);
– UK Average Earnings Index (m/m) at 09:00 (GMT+3);
– UK Claimant Count Change (m/m) at 09:00 (GMT+3);
– UK Unemployment Rate (m/m) at 09:00 (GMT+3);
– German ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
– Eurozone ZEW Economic Sentiment (m/m) at 12:00 (GMT+3);
– Eurozone Trade Balance (m/m) at 12:00 (GMT+3);
– Canada Consumer Price Index (m/m) at 15:30 (GMT+3);
– US Building Permits (m/m) at 15:30 (GMT+3);
– US Industrial Production (m/m) at 16:15 (GMT+3);
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.
On Friday, the Dow Jones (US30) was down 1.24% (for the week -2.40%), while the S&P 500 (US500) decreased by 1.46% (for the week -1.69%). The NASDAQ Technology Index (US100) closed Friday negative 1.62% (for the week -0.68%). Stock indices declined sharply on Friday, with the S&P 500 (US500) falling to a 4-week low and the Dow Jones (US30) falling to a 2-month low. Heightened geopolitical tensions heightened risk aversion and triggered the liquidation of long positions in equities on Friday.
Following last week’s alleged Israeli strike on senior Iranian military commanders in a Syrian compound, market participants were spooked as a flurry of reports emerged towards the end of the week that a potential Iranian retaliatory strike on Israel could be “imminent”. These Friday headlines quickly brought geopolitical concerns to the forefront and sparked a bout of risk aversion before the weekend. The Iranian attack did occur on Saturday in the form of drones and rockets launched toward Israel. Israel was able to repel the attack and did not announce an immediate intention to retaliate, while the US has said it wants to avoid a wider war in the Middle East.
Chipmakers were under additional pressure on Friday after it was revealed that the Chinese government has required telecom operators to replace foreign chips in their backbone networks by 2027. As a result, shares of ON Semiconductor (ON) closed down more than 5% and topped the NASDAQ (US100) losers list. Intel (INTC) shares were also down more than 5%, while Advanced Micro Devices (AMD), Micron Technology (MU), NXP Semiconductors NV (NXPI), and Microchip Technology (MCHP) were down more than 4%.
Bank earnings results for the first quarter were mixed on Friday. JPMorgan Chase (JPM) closed down more than 6% after managed net interest income for the first quarter came in below consensus, and full-year net interest income guidance came in below estimates. However, Wells Fargo & Co. (WFC) reported first-quarter earnings above consensus, and Citigroup (C) reported better-than-expected first-quarter FICC sales and trading revenue.
The bitcoin price fell more than 5% to below $64,000 on Sunday, extending Saturday’s 7% drop. Investors moved away from risky assets amid escalating tensions in the Middle East after Iran struck Israel.
Equity markets in Europe traded flat on Friday. The German DAX (DE40) was down 0.13% (for the week -1.28%), the French CAC 40 (FR40) closed down 0.16% (for the week -0.49%), the Spanish IBEX 35 (ES35) was up 0.34% (for the week -1.64%), the British FTSE 100 (UK100) closed positive 0.91% (for the week +1.07%).
ECB officials once again spoke with one voice about a rate cut in June. On Friday, ECB Governing Council representative Stournaras said that the ECB should not be afraid to change its cautious stance on interest rates away from that of the Federal Reserve and “now is the time to diverge”. His colleague, ECB Governing Council spokesman Kazaks, said: “If nothing changes, June will be the month when we see the first-rate cut by the ECB”. ECB Governing Council spokesman Muller said: “Persistently slower overall price growth in the Eurozone raises the likelihood of an ECB rate cut in June”.
WTI crude oil prices hit a six-month high on Friday, but prices fell back to $85 a barrel at the open on Monday as Israel successfully defended itself against a massive Iranian air attack over the weekend. However, oil volatility will remain elevated in the coming days as investors prepare for the Israeli government’s response to the attack. A full-scale war with Iran could further disrupt oil supplies, leading to further gains for the black gold.
Asian markets were predominantly up last week. Japan’s Nikkei 225 (JP225) rose by 0.30%, China’s FTSE China A50 (CHA50) declined 1.86%, Hong Kong’s Hang Seng (HK50) gained 0.43% for the week, and Australia’s ASX 200 (AU200) was positive 0.19%.
Chinese trade news on Friday was weaker than expected, negatively affecting global growth prospects. China’s March exports fell by 7.5% y/y, weaker than expectations of 1.9% y/y and the largest decline in 7 months. Imports in March unexpectedly fell by 1.9% y/y vs. expectations of 1.0% y/y growth. On April 15, the People’s Bank of China (PBOC) kept the rate on CNY100 bln one-year loans to some financial institutions under the medium-term lending facility (MLF) program at 2.5% amid efforts to ensure RMB stability.
S&P 500 (US500) 5,123.41 −75.65 (−1.46%)
Dow Jones (US30) 37,983.24 −475.84 (−1.24%)
DAX (DE40) 17,930.32 −24.16 (−0.13%)
FTSE 100 (UK100) 7,995.58 +71.78 (+0.91%)
USD Index 106.01 +0.73 (+0.69%)
Important events today:
– Switzerland Producer Price Index (m/m) at 09:30 (GMT+3);
– Eurozone Industrial Production (m/m) at 12:00 (GMT+3);
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.
In 2023, when Silicon Valley Bank collapsed, detractors claimed that the bank’s focus on DEI was responsible – rather than the bank overinvesting in bonds that suddenly lost much of their value.
Not long afterward, when a wall panel detached from an Alaska Airlines flight at 16,000 feet, opponents claimed without evidence that DEI’s corrosive effects were to blame.
More recently, when a cargo ship lost power and slammed into Baltimore’s Key Bridge, critics suggested that DEI was somehow at fault.
In the face of these attacks, many company leaders are troublingly silent about their commitment to DEI. I believe this is a mistake. It allows misrepresentations to take root, and it reinforces the exclusion and marginalization many workers of color already experience.
For starters, it’s useful to take stock of how American companies moved to DEI in the first place, and how diversity practices are typically structured.
For the overwhelming majority of U.S. history, workers who weren’t white men weren’t just legally banned from leadership roles; they could be barred from holding any role in an organization.
The formal exclusion of women of all races and men of color didn’t become illegal until the passage of the Civil Rights Act of 1964. That means that for nearly 200 years after the country’s founding, white men had virtually unrestricted and exclusive access to the levels of power in all organizations.
The objective, meritocratic past that DEI critics imagine is thus a myth. The centuries-long, systematic exclusion of white women and people of color gives lie to the idea that jobs have historically gone only to the most qualified.
After the Civil Rights Act, companies moved to address the new reality that the racial and gender discrimination that had been practiced with impunity for generations was now illegal. Affirmative action policies were one way organizations sought to address past and ongoing discrimination, and many companies, at least for a time, sought to close racial and gender disparities.
But by the 1980s, backlash to these goals was ascendant. Legal decisions such as the Supreme Court’s 1978 Bakke ruling allowed organizations to consider race as one of many factors when they evaluated applicants but specifically outlawed the use of quotas. Companies could thus consider race as part of a package but, contrary to popular opinion, could not hire candidates simply because they were Black (or from another marginalized group).
They could, however, consider diversity as a compelling interest that justified using race as one of a variety of factors in making decisions about hiring. A company that had no Black workers on its entire staff could thus seek to diversify, taking race into account alongside experience, qualifications, education and other criteria when considering a candidate.
What this hypothetical company could not do is simply hire a Black worker based exclusively on their race.
Diversity initiatives today
In the wake of ongoing backlash, most companies today have moved even further from trying to alleviate ongoing racial and gender disparities. Instead, they embrace the form of DEI that’s under harsh criticism today.
But today’s DEI doesn’t necessarily entail a focus on hiring or promoting more Black workers. It doesn’t even always focus on race. Instead, many DEI managers have sought to focus their efforts more broadly on diversity of thought, region or opinion as a way to avoid the kind of pushback they’re encountering today.
Additionally, companies often rely heavily on DEI practices such as mandatory diversity training or brief workshops with external consultants that actually depress the numbers of Black workers – and other workers of color – in leadership roles.
Today’s critics cast DEI as unfairly advantaging unqualified Black workers, but the reality is that companies stopped focusing on closing racial disparities long ago.
The numbers bear this out. While white men constitute only 30% of the U.S. population, as of 2017 they made up 80% of members of Congress, 85% of corporate executive officers, 95% of Fortune 500 CEOs and 97% of heads of venture capital firms.
The business case for diversity
Clearly, DEI is not reshaping America’s most powerful institutions in a way that places significant numbers of Black workers in leadership roles.
The irony is that the data shows very clearly that diversity is correlated with clear benefits to organizations. Companies with more racial and gender diversity among managers boast more profitability and more innovation than those without. They have advantages in recruitment, employee satisfaction and responding to market changes and consumer needs.
Organizations that are genuinely committed to DEI aren’t losing sight of the big picture; rather, they’re investing in their long-term financial success.
For purely self-interested reasons, then, companies should be offering a full-throated defense of DEI. Instead, they’ve been in retreat.
For example, law firms are walking back programs designed to attract lawyers of color, even though the legal profession is overwhelmingly made up of white workers. Similarly, efforts to increase venture capital funding to Black women are under attack, even though in 2018 less than 1% of a total of US$130 billion raised went to firms headed by women of color. And major tech companies are shifting resources away from post-2020 investments in DEI, even though Black workers remain significantly underrepresented in that industry as well.
DEI practices that work
It doesn’t have to be this way. Companies can still rely on evidence-based DEI practices that show results. One approach involves establishing mentoring programs that are open to everyone. Another is cross-training workers so they can build their skills in various parts of a company while at the same time broadening their networks. And a third tack includes investing in flexible, family-friendly workplace policies that send a message to workers that they and their needs matter.
None of these programs are reserved for members of any particular racial group, so they’re within the bounds of the law. The beauty of this approach is that even though these initiatives are race-neutral, research indicates they benefit workers of color more than mandating annual diversity training.
In addition to using measures like these that work, I believe it’s important for corporate leaders to stand up for DEI precisely because it’s under threat.
Some are doing this already. Jamie Dimon of JPMorgan Chase recently described himself as a “full-throated, red-blooded, patriotic, unwoke, capitalist CEO” who still plans to maintain the bank’s commitment to DEI, particularly when it comes to the approaches that are shown to net results. The celebrity businessman Mark Cuban has been similarly outspoken in support of DEI, unequivocally describing it as “good for business.”
Given that research shows workforce diversity helps companies boost profits, it’s surprising to me that more leaders don’t take this approach. The alternative is letting a false narrative that imperils their growth go unchallenged.
At the end of the trading day, the Dow Jones Index (US30) was down 0.01%, while the S&P 500 Index (US500) was up 0.74%. The NASDAQ Technology Index (US100) closed positive at 1.68% yesterday. Strength in technology stocks led the overall market higher on Thursday. Apple (AAPL) climbed more than 4% after it said it plans to upgrade its entire line of Mac computers with its proprietary processors designed for artificial intelligence. In addition, shares of chip companies rose Thursday on speculation that upcoming first-quarter earnings results will show strong demand for microchips.
The US Producer Price Index (displays the inflation rate between factories) for March rose by 0.2% m/m and 2.1% y/y in the US, slightly weaker than expectations of 0.3% m/m and 2.2% y/y. However, the core PPI (excluding food and energy) accelerated to 2.4% y/y from 2.0% y/y in February, slightly stronger than expectations of 2.3% y/y and the largest increase in 7 months. US weekly initial jobless claims fell by 11,000 to a 5-week low of 211,000, indicating a strengthening labor market versus expectations of 215,000. New York Fed President Williams said the Fed has made tremendous progress in balancing inflation and employment, but there is no need to lower interest rates soon. FRB Richmond President Barkin said the Fed still has some work to do to contain price pressures and could take its time in lowering interest rates. FRB Boston President Collins added that recent data has eased concerns about adjusting interest rates, although she still expects rate cuts to begin later this year.
Corporate earnings season for the first quarter begins today with results from major banks, including JPMorgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC). The consensus expects first-quarter earnings for S&P 500 companies to rise an average of 3.8% quarter over quarter.
Equity markets in Europe declined on Thursday. Germany’s DAX (DE40) fell by 0.79% yesterday, France’s CAC 40 (FR40) closed down 0.27% yesterday, Spain’s IBEX 35 (ES35) lost 1.16%, and the UK’s FTSE 100 (UK100) closed negative 0.47% on Thursday.
The European Central Bank left key interest rates unchanged and hinted at the possibility of a rate cut if upcoming forecasts indicate inflationary pressures are easing. Lagarde’s speech was soft and had a dovish bias. Still, the policymaker emphasized that the ECB is not committing to a specific rate trajectory and that future decisions will be data-driven.
WTI crude oil prices rose to $86 a barrel on Friday, recovering most of the previous session’s losses, as the prospect of a wider conflict in the Middle East continued to heighten fears of further supply disruptions. Israel is reportedly preparing for a direct attack from Iran in the next 24-48 hours, as Tehran has previously pledged to retaliate to an alleged Israeli attack on its embassy in Syria. The latest rounds of ceasefire talks between Israel and Hamas have also failed, with Israeli Prime Minister Benjamin Netanyahu saying they will continue the war in Gaza.
Natural gas prices for May fell sharply on Thursday due to a larger-than-expected 24 Bcf increase in EIA natural gas inventories last week, which exceeded expectations of 15 Bcf. As of March 29, the US natural gas inventories were 38.9% above the 5-year seasonal average, indicating an oversupply of natural gas.
Asian markets were mostly down yesterday. Japan’s Nikkei 225 (JP225) was down 0.35%, China’s FTSE China A50 (CHA50) lost 0.16%, Hong Kong’s Hang Seng (HK50) decreased by 0.26% and Australia’s ASX 200 (AU200) was negative 0.44%.
The Monetary Authority of Singapore (MAS) has maintained its April 2024 monetary policy rate target, extending the pause for the fourth straight month amid heightened cost pressures. The Authority said it will maintain the prevailing pace of appreciation in the nominal effective exchange rate of the Singapore dollar. The central bank said it expects the country’s GDP growth to be 1% to 3% this year, supported by a recovery in the manufacturing and financial sectors and normalization in domestic-oriented sectors. Meanwhile, MAS forecasts that the preferred core inflation rate will remain high in the coming quarters before declining in Q4 2024 and 2025. In January-February, core inflation averaged 3.4% on an annualized basis
At its April meeting, the Bank of Korea kept the benchmark rate at 3.5%, as expected. It was the tenth consecutive meeting to keep borrowing costs unchanged, with the central bank emphasizing the need for further progress on price stability before considering monetary easing. Inflation was 3.1% in March, mainly driven by higher agricultural and global oil prices, while core inflation eased to 2.4% from 2.6% in February.
S&P 500 (US500) 5,199.06 +38.42 (+0.74%)
Dow Jones (US30) 38,459.08 −2.43 (−0.01%)
DAX (DE40) 18,097.30 −142.82 (−0.79%)
FTSE 100 (UK100) 7,923.80 −37.41 (−0.47%)
USD Index 105.27 +0.02 (+0.02%)
Important events today:
– China Trade Balance (m/m) at 06:00 (GMT+3);
– Japan Industrial Production (m/m) at 07:30 (GMT+3);
– German Consumer Price Index (m/m) at 09:00 (GMT+3);
– UK GDP (m/m) at 09:00 (GMT+3);
– UK Industrial Production (m/m) at 09:00 (GMT+3);
– UK Manufacturing Production (m/m) at 09:00 (GMT+3);
– UK Trade Balance (m/m) at 09:00 (GMT+3);
– Indian Inflation Rate (m/m) at 15:00 (GMT+3);
– US Michigan Consumer Sentiment (m/m) at 17:00 (GMT+3).
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.
At the end of the trading day, the Dow Jones Index (US30) was down 1.09%, while the S&P 500 Index (US500) lost 0.95%. The NASDAQ Technology Index (US100) closed yesterday negative 0.84%. A sharp rise in bond yields pressured equities yesterday after the March US Consumer Price Index exceeded expectations for the third consecutive month, reinforcing the likelihood that the Federal Reserve will not rush to cut interest rates. The annualized US inflation rate was 3.5% in March 2024, the highest since September, up from 3.2% in February and forecasts of 3.4%. In addition, core CPI (excluding food and energy) rose by 0.4% m/m to 3.8% y/y, stronger than expectations of 0.3% m/m and 3.7% y/y. Fed swap prices are now pricing in only a 50 bps rate cut this year, less than the Fed’s recent 75 bps dot plot. Markets estimate the odds of a 25 bps rate cut at 3% at the next FOMC meeting on May 1 and just 21% (vs. 70% last week) at the next meeting on June 12.
Minutes from the March FOMC meeting showed that the Federal Reserve does not believe it is appropriate to lower the target range until there is confidence that inflation is moving steadily toward 2%. The central bank still closely monitors inflation risks but expects to see some unevenness in monthly inflation readings as inflation returns to target. The so-called dot plot showed policymakers still plan to cut interest rates three times this year, matching quarterly forecasts made in December.
The Bank of Canada (BoC) kept its key rate at 5%, as expected, and refrained from hinting at the start of rate cuts because of lingering upside risks to inflation. The central bank noted that price pressures have eased across a wide range of goods and services since the last meeting but added that an uncertain macroeconomic backdrop and higher-than-expected commodity prices, including oil, prevent disinflation from converging more smoothly. Bank of Canada Governor Macklem added that while recent data indicate some progress in containing core inflation, it is still insufficient to justify monetary easing with confidence. As such, the Bank of Canada expects inflation to remain around 3% in the first half of this year and not reach the 2% target until 2025.
Equity markets in Europe traded without a single dynamic on Wednesday. Germany’s DAX (DE40) rose by 0.11%, France’s CAC 40 (FR40) closed down 0.05%, Spain’s IBEX 35 (ES35) lost 0.38%, and the UK’s FTSE 100 (UK100) closed positive 0.33% on Wednesday.
The European Central Bank (ECB) will hold a monetary policy meeting today. Market participants expect the ECB to leave the key rate unchanged at 4.5%. After last month’s meeting, the Eurozone economy has gained momentum but is still close to recession. Therefore, the ECB will likely want to get an update on inflation and labor market data before embarking on full-blown easing. Most of the central bank’s recent statements hint that a key rate cut in June is a real possibility. Therefore, given current market speculation, there is a risk that Lagarde’s statement and press conference will be less dovish than financial markets expect. In that case, the euro could get a boost to growth. But if Lagarde’s statement is confidently dovish with a hint of a real rate cut in June, the euro will continue to decline.
WTI crude oil prices rose to $85.7 a barrel on Wednesday, breaking a two-day decline, as the market reacted to the news from Gaza. Several important Hamas figures were killed in an Israeli airstrike, which could complicate ceasefire talks. Tensions in the Middle East ran high, with Israel warning OPEC representative Iran that it will attack the Islamic Republic if Tehran strikes Israel, with the US reportedly confident of an imminent strike by Iran or its supporters on Israel. The EIA reported a 5.841 million barrel rise in inventories on Wednesday, beating market expectations for a 2.366 million barrel increase.
Asian markets traded without any unified dynamics. Japan’s Nikkei 225 (JP225) was down 0.48% yesterday, China’s FTSE China A50 (CHA50) lost 0.42%, Hong Kong’s Hang Seng (HK50) was up 1.85% overnight and Australia’s ASX 200 (AU200) was positive 0.31%. Asian equity markets fell on Thursday, following a sharp decline on Wall Street overnight. Investors also priced in data that China’s consumer prices rose less than expected in March, while producer prices fell by the most in four months. Chinese consumer prices were 0.1% y/y in March 2024, compared to market forecasts of 0.4% y/y, after rising to 0.7% in the previous month. China’s lower-than-expected inflation numbers have bolstered bets on further policy easing from the PBoC.
Fitch Ratings revised its outlook on China’s sovereign credit rating to negative from stable while affirming its A+ rating amid growing concerns about the outlook for the country’s public finances. The agency cited large budget deficits and a sharp rise in government debt in recent years as undermining fiscal reserves from a rating perspective.
The Japanese yen hit a new 34-year low. Traders are now expecting currency intervention from the Bank of Japan (BoJ), seeing the 152-153 per dollar exchange rate as a potential catalyst. On Tuesday, Finance Minister Shun’ichi Suzuki said that the authorities do not rule out any measures against excessive yen movement.
S&P 500 (US500) 5,160.64 −49.27 (-0.95%)
Dow Jones (US30) 38,461.51 −422.16 (−1.09%)
DAX (DE40) 18,097.30 +20.61 (+0.11%)
FTSE 100 (UK100) 7,961.21 +26.42 (+0.33%)
USD Index 105.17 +1.03 (+0.99%)
Important events today:
– China Consumer Price Index (q/q) at 04:30 (GMT+3);
– China Producer Price Index (q/q) at 04:30 (GMT+3);
– Eurozone ECB Interest Rate Decision at 15:15 (GMT+3);
– Eurozone ECB Monetary Policy Statement at 15:15 (GMT+3);
– US Producer Price Index (m/m) at 15:30 (GMT+3);
– US Initial Jobless Claims (w/w) at 15:30 (GMT+3);
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.
Article by 
