Think Thursday
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*Data as of 4pm WAT
Market News
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Market Commentary:
Currencies/Macro:
The US dollar index fell by 0.4% today, influenced by strong Eurozone service sector PMIs and weaker US PMI updates. The EUR rose from 1.0639 to 1.0711, while USD/JPY fluctuated between 154.56 and 154.88, reaching a 34-year high despite Japan's continued protests against yen weakness.
US PMIs underperformed expectations, with the composite index dropping to 50.9 (expected 52.0) and services at 50.9. Manufacturing was particularly weak at 49.9. Employment figures reached their lowest since June 2020, and there was a notable moderation in both prices paid and received.
The Richmond Fed manufacturing survey showed a slight improvement to -7, indicating moderated prices and wages. New home sales unexpectedly rose by 8.8%.
Eurozone PMIs were stronger, with the composite index rising to 51.4 and services reaching 52.9. The manufacturing index, however, remained subdued at 45.6. The reports highlighted increasing employment and persistent pricing pressures.
UK PMIs also showed strength, with the composite index rising to 54.0 and services at 54.9. However, manufacturing was weaker at 48.7.
The Bank of England’s Chief Economist, Pill, expressed continued concern over inflation, indicating that significant work remains to tame underlying price pressures.
Interest Rates:
U.S. Treasury Yields: The 2-year Treasury yield decreased from 5.00% to 4.91%, and the 10-year yield dropped from 4.65% to 4.57%. The markets currently estimate a 75% chance of a Fed funds rate cut by September, maintaining the current mid-rate at 5.375% for the next meeting on May 2.
Credit Markets: The credit indices experienced a robust session, aligning with equities. Main tightened by 2.5 basis points to 55.5, CDX improved by 2 basis points to 52.5, and US investment-grade cash bonds tightened by 1-2 basis points.
Commodities:
Crude Markets Update: Crude prices were bolstered by the API's report of a 3.23 million barrel drop in U.S. crude inventories, a recovering U.S. stock market, and a weakening U.S. dollar. The June WTI contract rose by 1.78% to $83.36, while the June Brent contract increased by 1.7% to $88.48.
Legislative Developments: Attention was also on the Ukraine and Israel support bill, which proposes to expand sanctions on Iran's crude exports to include entities involved in the transportation and processing of the oil. The bill has passed a procedural vote and is set for a full Senate vote.
Market Analysts' Views: Carlyle CSO Jeff Currie suggested that crude could surpass $100 under certain conditions, whereas StanChart's Eric Robertson sees prices likely stabilizing in the mid to low $90s, unless escalated by geopolitical tensions.
Energy Sector Negotiations: Shell and TotalEnergies are reportedly among companies negotiating to invest in Abu Dhabi National Oil Co's upcoming LNG export project, with a decision expected soon.
European Gas Markets: Gas prices in Europe dropped 3% due to weak demand and favorable weather, despite a reported leak at Norway's Hammerfest gas facility, which traders largely disregarded.
Investment Tip of The Day
Regularly assess the liquidity of your investments to ensure you can access funds when needed without significant losses. Investments that are highly liquid, like stocks in major companies or government bonds, can be quickly sold if cash is needed. Balancing these with less liquid assets, such as real estate or private equity, can optimize your portfolio’s flexibility and readiness for both planned and unexpected financial needs.