Stock index rally extends, but slows

Intermediate

Macroeconomic/ geopolitical developments

  • The financial markets have been less dominated by the Russian invasion of Ukraine, as a lack of any significant escalation has seen a further shift towards more of a “risk on” theme for stocks since mid-March.
Ukraine war
  • There have also been hopes from the Ukraine/ Russia talks and also from reported setbacks suffered by Russian troops.
  • US Yield curve inversion has grabbed the headlines in latter March with both the 5-30 and 2-10 year segments of the curve inverting, a warning signal of possible recession in the following 1-2 years.
US Yield curve
  • The US Employment report saw the Unemployment rate fall more than anticipated to 3.6%, whilst the Non-Farm Payroll job gains came in at 431K versus an expected 490K.
  • Global Markit and US ISM Manufacturing PMI data on Friday broadly missed consensus estimates.
  • Russia has threatened to halt natural gas supplies to Europe if not paid in Rubles.
  • Bond buying intervention from the Bank of Japan (BoJ) saw huge purchases of JGBs as the BoJ kept the 10 year yield below its 0.25% level.
10yr yield

Global financial market developments

  • Global stock averages were again mostly higher last week bit with US averages posting their first losing quarter since Q1 2020 when the global pandemic hit.
SPX
  • US and global bonds sold off further and then rebounded to lower yields as the US Bond market suffered its worst quarter since 1980!
  • The US Dollar has been mixed again, in consolidation, dipping and rebounding.
  • Gold, Oil and Copper have all moved into erratic consolidation phases since March blow-out tops were established, with Gold neutral, Oil with a negative bias and Copper with a positive tone.
oil
copper

Key this week

  • Geopolitical focus:
    • Monitoring for a possible military escalation in Ukraine.
    • Also closely watching for potential for Ukraine/ Russia talks to improve and maybe for a ceasefire.
  • Central Bank Watch: We get Governor Bailey of the Bank of England speaking on Monday and the Reserve Bank of Australia (RBA) interest rate decision and statement on Tuesday and the Federal reserve Open Market Committee (FOMC) meeting minutes on Wednesday.
  • Macroeconomic data: A light data week with the global Markit and US ISM Services and Composite PMIs the standouts on Tuesday.
DateKey Macroeconomic Events
04/04/22BoE Governor Bailey speaks
05/04/22RBA interest rate decision and statement; global Markit and US ISM Services and Composite PMIs
06/04/22FOMC meeting minutes
07/04/22EU Retail Sales
08/04/22Canadian Employment report

Editor in chief

Steve Miley is the Market Chartist and has 29 years of financial market experience and as a seasoned expert now has many responsibilities. He is the founder, Director and Primary Analyst at The Mar... Continued

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