Equities: New extremes and a challenging opportunity set
Discover insights on the future of equity markets in Q1 2024 and navigate the potential recession with strategic investment choices.
Chief Investment Officer
Summary: Yesterday saw another late sell-off on Wall Street, but one that was once again largely erased overnight as sentiment improved again in Asia. Today we look forward to the latest US jobless claims data and a Bank of England meeting as the pound finds itself under pressure in recent sessions.
What is our trading focus?
What is going on?
Australia registered a record trade surplus in March as a rebound in Chinese demand for commodities boosted exports while imports fell as Covid19 lockdowns reduced demand.
China April Caixin Services PMI registered a weak reading of 44.4. suggesting that China’s services sector contracted further in April.
Brazil cut Selic Rate, its interest rate benchmark by 75 bps to 3.00%, more than consensus expected as Brazil’s economy and currency are under significant pressure. The Brazilian real (BRL) closed more than 2.5% weaker versus the USD at its lowest daily close for the cycle and is down some 30% versus the USD this year.
The EU will offer membership and more aid to the Balkans, as they yesterday offered “unequivocal support” for allowing the five former Yugoslavia countries (Serbia, Kosovo, Montenegro, Albania, Bosnia and North Macedonia) and Albania to become members of the EU and extended offers of more financial support. The move was seen as an attempt to counter influence and good-will moves from Russia and China in the region. The US democracy rights group Freedom House labeled Hungary a “hybrid regime” in a report this week, calling the regime there something between a democracy and authoritarian regime and gave the same label to Montenegro and Serbia.
What we are watching next?
More Q1 earnings Uber Technologies (Today), Booking (Today) and Siemens (Fri).
US Weekly Initial Jobless Claims (today) and US Apr. Nonfarm Payrolls Change and Unemployment Rate (both tomorrow) – the market yesterday shrugged off the -20.2 million in US April ADP payrolls changes and may do the same for Friday’s official Nonfarm payrolls change series and the unemployment rate spiking to perhaps 16%. But the weekly initial jobless claims series becomes more important from here (perhaps starting with next week’s reading more than today’s) as many US states are opening up from shutdowns..
Turkey – the Turkish lira is under major pressure again even as the country’s banking regulator moved late Tuesday to stem foreign speculation in the country’s currency, TRY, with moves that amount to capital controls. The USDTRY rate is up over 3% this month. We don’t put USDTRY on the trading list because speculation is dangerous and a further devaluation is already priced into the forward curve.
US-China relationship – this is a critical additional layer to this crisis, as a further falling out between the world’s two largest economies and renewal of trade tensions or worse will add another level of seriousness to concerns that the recovery will stumble. USDCNH, noted above, is a key market barometer, but new Trump tariffs, etc., would also dent confidence broadly.
Economic Calendar Highlights (times GMT)
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