Weekly Market Review - April 22-26
The current week, which ends April 26, saw global equities demonstrating bullish signs. In the US, the S&P 500 and NASDAQ indexes rose to record highs, as several companies reported better than expected earnings and revenues. The markets are boosted by hopes of better trade relations between the US and China.
The yield on the US 10-year Treasury note fell to 2.50% from 2.56% during the previous week.
In the oil market, the price of a barrel of WTI crude oil fell about 1.8% to $63.50.
Here are the most important events that moved the economy this week:
US GDP Growth Above Expectations
On Friday, the US Department of Commerce reported that the US economic growth in the first quarter of this year expanded by 3.2% in annual terms, up from a 2.2% reading recorded in the fourth quarter of 2018. The performance is above economists’ expectations, who anticipated a growth rate at about 2.2% again. The GDP growth was driven by improved foreign trade and rising inventories, while consumer and business spending was below forecasts. The report came after a record week for the US stock market, where S&P and NASDAQ indices updated their historical highs.
US Might Reactivate Oil Sanctions on Iran
The US government said during the week that it would cease to offer exemptions to sanctions to countries that buy oil from Iran, a country that has nuclear ambitions and doesn’t have decent relationships with the US. The reliefs should expire on May 2 and might cut Iranian oil income by over $50 billion per year. In response, Iran threatened to shut down the Strait of Hormuz, a strategic region in the Persian Gulf through which a significant volume of Middle East’s oil moves. The prices of oil reacted immediately, with Brent crude hitting the highest level since October 2018.
BOJ Says Rates to Remain Low
The Bank of Japan (BOJ) revealed that it would keep the interest rates at super-low levels at least until the first quarter of 2020, which gave economists a more specific view on the future situation. Besides, the BOJ reduced its GDP growth and inflation estimates and admitted that it was almost impossible to reach its 2% inflation target in the next few years. The central bank anticipates the domestic economy to grow 0.8% this year, down from the previous forecast at 0.9%.
China to Focus on Reforms Rather Than Stimulus
The Chinese government might change priorities and focus on structural reforms instead of targeted stimulus, local media reported based on a meeting of politburo from last week. The move might be backed by better-than-expected economic growth in the first quarter. The markets didn’t agree with the government’s position, with the stock markets tumbling this week as investors regard the change of focus as premature.
Spain to Have General Election
On April 28, Spain will organise the general election, which might lead to a trend in which the European political space becomes even more fragmented. According to recent polls, no party seems to be able to form a majority in the parliament while a potential coalition will be difficult to achieve. However, the good news is that Spain has generally been favourable to the European Union, so it is unlikely that Euroscepticism will show up as a result of the election.
US-China Trade Negotiations Continue
US main trade negotiations, led by US Trade representative Robert Lighthizer and Secretary of the Treasury Steven Mnuchin will return to the capital of China next week for another round of talks. After the meeting in Beijing, which might end with an agreement, the parties will gather in Washington on May 8. China’s President Xi Jinping said on Friday that he was ready to resolve many of the issues that the US find important, including to open markets to more foreign investment.
Upcoming News to Watch
Spanish General Election will be in the spotlight this Sunday, with most of the polls pointing to a scenario in which no single party wins the majority.
On Monday, investors will find out the economic sentiment index in the eurozone, while the GDP growth and unemployment rate indicators are expected to be released the next day. On Friday, the eurozone will update on its consumer prices index (CPI).
On Tuesday, China will publish its purchasing managers’ indexes while Canada will report on its GDP performance.
Thursday will be an important day as the UK will have its local elections. The Bank of England meeting is planned for the same day.
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