Mixed price action this week from the broad markets as traders juggled rising recession speculation against geopolitical developments.
On the forex front, the euro took the top spot with the help of some level of improvement on the Ukraine conflict early on, but gave up some of its gains later as European sentiment data disappointed.
Notable News & Economic Updates:
On Monday, President Zelenskyy said Ukraine was ready to discuss neutrality status; U.S. Secretary of State Antony Blinken said U.S. is not looking for a regime change in Russia or anywhere
U.S. announced on Wednesday that they will release 180 million barrels from its crude oil SPR
Chinese official manufacturing PMI slumped from 50.2 to 49.5 vs. 49.7 consensus
S&P Global Eurozone Manufacturing PMI fell to 56.5 in March vs. 58.2 in February; a 14-month low
Brazil central bank raised Chinese yuan in forex reserves to 4.99% vs. 1.21% 2020; U.S. dollar reserves fell to 80.34% from 86.03% previous
ISM U.S. manufacturing PMI decreased in March to 57.1 vs. 58.6 in February; Price index ticked up 11.5 points to 87.1; Employment Index rose 3.4 to 56.3; New orders index fell 7.9 to 53.8
ASEAN PMI eased to 51.7 in March from 52.5 in February; a six-month low amid softer demand conditions
Russia says Ukraine choppers made rare cross-border strike on an oil depot in Belgorod, Russia
The EU Parliament passed crypto rules on Thursday, proposing a measure to outlaw all anonymous crypto transactions
U.S. added a net 431K jobs in March vs. upwardly revised 750K in February, but below 490K forecast; unemployment rate dips to 3.6% vs. 3.8% previous
The 2-year U.S. Treasury yield closed at 2.44% on Friday, six basis points above the 10-year U.S. Treasury bond at 2.38%; this inversion of the yield curve has signaled recessions in the past.
Intermarket Weekly Recap
It looks like ceasefire hopes in Ukraine continued to play out early in the week, with Ukraine President Zelenskyy ready to discuss Ukraine’s neutrality status and comments from U.S. officials that the U.S. is not seeking a regime change in Russia.
This was reflected in the markets by a fall in oil and gold prices, as well as a fall in bond yields as some level of high inflation concerns may have pulled back. At the same, this shifted risk sentiment positive early in the week, and was likely what lifted equities and crypto assets at the same time.
Recession speculation is also starting to grow, likely sparked by this week’s round of business and consumer sentiment surveys. We’re seeing a net negative turn in sentiment, most notably from China and Europe, which possibly contributed to the weakness in oil and bounce in bond prices/fall in bond yields on Tuesday and Wednesday.
On Thursday, oil was the big mover on the session as it fell over 7% to below $100 per barrel , correlating with an announcement that the U.S. will release one million barrels of oil per day to reduce energy prices. We also got an announcement from OPEC+ that their plan to raise oil output to 432K barrels per day in May would not change, as expected.
Friday was a mixed bag across the broad markets, but it looks like risk-off sentiment may have been the main driver with equities, gold and oil lower through the U.S. session, while bond yields, the U.S. dollar and bitcoin saw some green.
This indicates there were several themes in play, likely a bearish reaction to another round of weaker-than-expected business survey data and news of a Ukrainian attack on Russia inside Russia’s border, and a very strong U.S. employment report.
There are now a record 5 million more job openings than unemployed people in the U.S.
Fed’s Harker expects 25-basis-point rate hikes, but open to 50 basis points
U.S. consumer confidence rebounds to 107.2 in March vs. 105.7 in Feb.
US companies add 455K jobs in March, ADP report shows
U.S. Core PCE price index gains +0.4% m/m; up 5.4% y/y
Chicago business barometer jumped from 56.3 in Feb. to 62.9 in March; above the forecast of 57.0.
U.S. Weekly jobless claims rose to 202K from 188K in the previous week.
U.S. manufacturing PMI hit 58.8 in March vs. 57.3 in February – S&P Global
BOE Governor Bailey says BOE softened rate guidance in face of uncertainty
U.K. mortgage approvals fell from 74K to 71K vs. 75K forecast
U.K. GDP in Q4 2021: +1.3% q/q vs. 1.0% previous
U.K House prices rose 14.3% y/y in March; +1.1% m/m
S&P Global / CIPS UK Manufacturing PMI fell to a 13-month low of 55.2 in March vs. 58.0 in February
German GfK consumer climate index sank from -8.5 to -15.5 vs. -14.6 consensus
German import prices rose 1.3% vs. projected 1.5% gain
ECB Lane said on Tuesday that most of Europe’s high inflation will fade away
Germany declared on Wednesday an ‘early warning’ for supply emergency as it prepares shift away from Russian gas
Germany Prelim CPI for March: +7.3% y/y; +2.5% m/m
Germany Retail Sales were up 0.3% in February vs. 0.5% forecast
Euro area unemployment at 6.8% in February; EU at 6.2%
S&P Global / BME Germany Manufacturing PMI fell further to 56.9 in March vs. 58.4 in February.
S&P Global France Manufacturing PMI from from a six-month high of 57.2 in February to 54.7 in March
ECB Governing Council member Klaas Knot said bond-buying should end before Summer, potential interest rate hikes as early as September
The Swiss National Bank said on Tuesday that monetary policy is not the way to curb real estate risks
Swiss KOF leading indicator slumps from 105.3 to 99.7 on war concerns
Swiss CPI came in at +2.4% in March as expected vs. 2.2% in February
Swiss Manufacturing PMI rises to 64.0 vs. 62.6
Canada GDP grew by +0.8% m/m in February as expected vs. +0.2% in January
S&P Global Canada Manufacturing PMI hits a record at 58.9 in March vs. 56.6 in February
New Zealand building consents rise by 10.5% in February vs. 8.7% drop in January
New Zealand ANZ business confidence improves from -51.8 to -41.9 in March
ANZ Roy Morgan NZ Consumer Confidence fell to 77.9 in March vs. 81.7 in February
AU Q1 2022 business confidence, conditions dropped 5 points to +14 and +9 respectively
Australian retail sales jumped another 1.8% vs. projected 0.9% uptick
Australia Private Sector Credit grew 0.6% m/m in February
Australia building permits surged 43.5% m/m in February vs. -27.9% m/m in January
S&P Global Manufacturing Purchasing Managers’ Index for Australia improved to 57.7 in March vs. 57.0 in February
BOJ makes rare 2nd offer to buy unlimited bonds as yields test policy limits
Japanese unemployment rate dipped from 2.8% to 2.7% in March
BOJ Governor Kuroda said on Tuesday that there were no changes in policy stance and no plans to issue a CBDC
Japan Feb retail sales fell by 0.8% in February; the first decline in 5 months on Omicron curbs
Bank of Japan offers to buy super-long JGBs in emergency operation
Japanese chief cabinet secretary Matsuno said on Thursday that they are monitoring FX moves closely
au Jibun Bank Japan Manufacturing PMI rose to 54.1 in March vs. 52.7 in February
Japan Finance Minister Suzuki said on Friday that the Bank of Japan has target for inflation, not for FX rates