MFS Week in Review
A review of the week's top global economic and capital markets news.
A review of the week's top global economic and capital markets news.
For the week ending 10 May 2024
As of midday Friday, global equities rose sharply on the week, approaching record levels amid signs of an upswing in growth in Europe along with downshifting growth in the United State that has reduced the odds of overheating. Ahead of next week’s release of pivotal U.S. inflation data, the yield on the U.S. 10-year Treasury note was little changed at 4.49%. The price of a barrel of West Texas Intermediate crude oil rose a dollar to US$79.95. Volatility, as measured by the Cboe Volatility Index (VIX), continued to sink, falling to 12.8 from 13.8 last Friday.
MACRO NEWS
U.S., Israel at odds over Rafah
U.S. President Joe Biden said Wednesday that the U.S. would block the delivery of weapons that could be used by Israel against Hamas fighters in densely populated Rafah, the city in southern Gaza where more than a million Palestinians are thought to be sheltering. On Thursday, Israeli Prime Minister Benjamin Netanyahu said that if it must, Israel will proceed without U.S. assistance. Tens of thousands of people have fled Rafah since Monday, when Israel called for the evacuation of part of the city. Israeli officials believe that Hamas can’t be defeated without conducting operations in Rafah, operations that U.S. officials see as counterproductive.
Bank of England sets stage for rate cuts
The Bank of England held rates steady at 5.25% at its Thursday meeting but set the stage for cuts potentially as early as next month. Governor Andrew Bailey said it is “likely we will need to cut the bank rate” and that rates may fall more sharply than markets expect. BOE Chief Economist Hew Pill added later Thursday that the bank is seeing encouraging signs on both inflation and growth. His optimism on growth was borne out on Friday when the United Kingdom reported Q1 growth of 0.6% from the prior quarter, beating forecasts of a 0.4% rise.
BOJ’s Ueda reverses course on yen impact
Having set off a wave of yen-selling last week after opining that yen weakness was unlikely to impact inflation or monetary policy, Bank of Japan Governor Kazuo Ueda backtracked this week, saying it would be right to raise rates faster if upside price risks grow, adding that the one-sided weakness of the yen is a negative for Japan’s economy. He said the BOJ will carefully monitor the currency’s weakness as it assesses the need to adjust monetary policy. After the comments, markets fully priced in a 0.10% rate hike at the July BOJ meeting, though the yen continued to weaken.
QUICK HITS
EARNINGS NEWS
With about 92% of the constituents of the S&P 500 Index having reported for Q1 2024, blended earnings per share (which combines reported data with estimates for those that have yet to report) shows that earnings slightly rose around 5.49% compared with the same quarter a year ago, according to data from FactSet. Sales growth is up 4.1% year over year. Markets are eagerly awaiting Nvidia’s earnings report, which is not due until Wednesday 22 May.
Past performance is no guarantee of future results.
Sources: MFS research, Wall Street Journal, Financial Times, Reuters, Bloomberg News, FactSet Research, CNBC.com.
This commentary was first published in the United States by MFS and is distributed in Canada by SLGI Asset Management Inc., with permission.
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