Home
IU

The Dance of the Markets: A Tale of Gold, Stocks and Central Banks

As the sun set on Wall Street this past Friday, the stock market painted a picture of defiance amidst economic uncertainty. The Dow Jones Index (US30) mustered a rally, surging by 1.65% and trimming the week’s losses to -1.30%. Similarly, the S&P 500 Index (US500) sprang up by 1.85%, reducing its weekly loss to -0.73%. The technology-driven NASDAQ (US100) managed to not only reverse the week’s losses but also posted a modest gain of 0.21% following a 2.25% surge on Friday.


▸ VIEW FULL MARKET PROFILE PAGE ◂

Fears of a looming recession in the latter half of the year have spurred investors to anticipate a decrease in interest rates. However, the surprising addition of 253,000 jobs to the US economy, far exceeding the forecast of 181,000, coupled with a fall in the unemployment rate from 3.5% to 3.4%, paints a different picture. These figures suggest the Federal Reserve may maintain high interest rates for a longer period, possibly even considering an 11th consecutive hike in June.

St. Louis Federal Reserve President, James Bullard, echoed this sentiment, expressing openness towards either raising rates or keeping them steady at the Fed’s June meeting. Bullard, subscribing to the ‘data-dependent’ position, suggested the current rate level of 5% to 5.25% is at the ‘lower end’ of what might be necessary, pointing towards a possible need for another half-point increase to ensure a steady decrease in inflation.

Meanwhile, deposits at US commercial banks fell to their lowest level in nearly two years by the end of April, according to data released by the Federal Reserve. Yet, total lending by banks increased, driven by record levels of outstanding loans and leases.


▸ VIEW FULL MARKET PROFILE PAGE ◂

Across the Atlantic, European equity markets also showed signs of resilience on Friday. The German DAX (DE30) gained 1.44%, posting a weekly gain of 0.48%. France’s CAC 40 (FR40) rose by 1.26% on Friday, however, it registered a weekly loss of -0.88%. Spain’s IBEX 35 (ES35) increased by 1.11%, but a weekly loss of -2.06% was observed. The UK’s FTSE 100 (UK100) also managed to climb 0.98%, trimming the weekly loss to -0.68%.


▸ VIEW FULL MARKET PROFILE PAGE ◂

Amidst these developments, the European Central Bank (ECB) officials declared their intention to continue raising interest rates until inflation is under control. This was confirmed by French central bank governor François Villrois de Galleau and his Lithuanian counterpart Gediminas Simkus. This resolve comes despite signs of cooling demand, as indicated by the more-than-expected drop in Eurozone retail sales in March.

Simultaneously, the gold market experienced a downturn on rumours that the Fed may once again raise rates in June. Gold’s value tends to have an inverse relationship with government bond yields, which are influenced by the dollar index. Therefore, a potential interest rate hike might lead to an increase in the dollar and government bond yields, thereby pushing gold and silver prices down. Despite this, the mid-term outlook for gold remains bullish, as it’s believed that the US Federal Reserve is nearing the end of its tightening cycle.


▸ VIEW FULL MARKET PROFILE PAGE ◂
Asian Markets and the Saudi Economy: An Uplift

In the eastern hemisphere, Asian markets displayed noteworthy growth over the past week. Japan’s Nikkei 225 (JP225) advanced 2.39%, China’s FTSE China A50 (CHA50) tacked on 0.37%, Hong Kong’s Hang Seng (HK50) rose by 0.50%, India’s NIFTY 50 (IND50) leapt 0.96%, and Australia’s S&P/ASX 200 (AU200) increased by 0.37%.


▸ VIEW FULL MARKET PROFILE PAGE ◂

Moving to the Middle East, the Saudi economy experienced a 3.9% growth in Q1, primarily due to non-oil activities. The International Monetary Fund (IMF) reports that the Saudi economy expanded by 8.7% last year and predicts a GDP growth rate of 3.1% for this year.

Monetary Actions in Singapore and Australia

In a significant development in Southeast Asia, the Monetary Authority of Singapore (MAS) imposed additional capital requirements on DBS Bank, a subsidiary of the country’s largest lender, DBS Group. This measure comes in the wake of recent disruptions to its banking services.

Meanwhile, down under, the Australian government plans to revise its inflation forecasts downward and anticipates a more protracted decline in unemployment in the 2023/24 budget. This could potentially drive a much-needed increase in real wages. Unemployment is projected to be at 3.5% by the end of Q2.


▸ VIEW FULL MARKET PROFILE PAGE ◂
Commodity Market Fluctuations

In the commodities market, futures for cotton (+4.03%), wheat (+3.94%), silver (+2.79%), and corn (+2.09%) showed the most significant gains last week. On the flip side, futures for natural gas (-12.32%), WTI oil (-7.11%), Brent oil (-6.17%), and lumber (-2.15%) recorded the largest drops.


▸ VIEW FULL MARKET PROFILE PAGE ◂
Market Movers and Shakers

Key market indicators at the end of last week were:

  • S&P 500 (F) (US500) at 4,136.25, gaining +75.03 (+1.85%)
  • Dow Jones (US30) at 33,674.38, gaining +546.64 (+1.65%)
  • DAX (DE40) at 15,961.02, gaining +226.78 (+1.44%)
  • FTSE 100 (UK100) at 7,778.38, gaining +75.74 (+0.98%)
  • USD Index at 101.28, dropping -0.12 (-0.12%)

▸ VIEW FULL MARKET PROFILE PAGE ◂
Noteworthy Events in the Coming Days

Events to watch for today include the release of the Japan Monetary Policy Meeting Minutes at 02:50 (GMT+3), Japan Services PMI (m/m) at 03:30 (GMT+3), and German Industrial Production (m/m) at 09:00 (GMT+3).


▸ VIEW FULL MARKET PROFILE PAGE ◂

As the sun rises on another week of trading, the markets continue their dance, guided by the invisible hand of economic forces and the decisions of central banks around the globe. Stay tuned for further updates on these fascinating dynamics.

“The mutual fund industry has been built, in a sense, on witchcraft.” – John C. Bogle

sc name=”fma-cta”]

BLOOMBERG GLOBAL NEWS

Bloomberg video news feed with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED

RBA ECONOMIC UPDATES

Periodic updates on the Australian economy, direct from the RBA, with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED

US FEDERAL RESERVE UPDATES

Bloomberg News focussed upon the Federal Reserve, with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED

FX/GLOBAL BRIEFS

Brief global updates with a focus upon currencies, with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED

ASX MARKET UPDATES

ASX-focussed updates, with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED

BLOOMBERG BRIEFS

Global briefs from Bloomberg with live charts, watchlists & fundamentals
Audio/video feed with live charts, watchlists & fundamentals
CHARTS + FEED