Wealth Wednesday
Ranora Daily - Your daily source for reliable market analysis and news.
Market Data
Local
Global
*Data as of 4pm WAT
Market News
Local
Global
Market Commentary:
Currencies/Macro:
The US dollar index rose slightly by 0.1% today, hitting a new six-month high, influenced by higher US bond rates following comments from Fed Chair Powell regarding the need for more patience before reducing interest rates amidst persistent inflation concerns.
EUR/USD fluctuated between 1.0601 and 1.0654. USD/JPY reached a new 34-year high, climbing from 154.30 to 154.79.
Fed Chair Powell stated the likelihood of delaying interest rate cuts due to recent high inflation readings and a strong labor market, emphasizing a more cautious approach to policy adjustments.
US industrial production in March matched expectations with a 0.4% increase, supported by a significant rise in manufacturing output. Housing starts significantly declined by 14.7%, with building permits also falling by 4.3%.
Canadian CPI for March showed a monthly increase of 0.6% and an annual rise of 2.9%, aligning with expectations, while the core measure slightly missed estimates.
Germany's ZEW investor confidence improved notably, with the expectations index rising to +42.9. The Eurozone's overall economic sentiment also increased, reflecting a more positive outlook among investors.
The UK's unemployment rate slightly exceeded expectations at 4.2%, with average weekly earnings remaining robust.
The IMF raised its global growth forecasts for 2024 and 2025, suggesting a smoother global economic trajectory than previously anticipated, with the US being a key driver of this positive adjustment.
Interest Rates:
Following comments from Fed Chair Powell and the latest US economic data, US Treasury yields reached their highest levels since November. The 2-year yield rose to a peak of 5.01% before settling at 4.97%, while the 10-year yield touched 4.69% before closing at 4.67%.
The Federal Reserve’s funds rate is expected to remain at 5.375% at the upcoming May 2nd meeting, with the probability of a rate cut in July now at 45%.
In Europe, despite ongoing geopolitical tensions, the primary markets saw active issuance with six new offerings across the corporate and financial sectors, including covered bonds from Banca Monte dei Paschi and Equitable Bank.
In contrast, the US primary market was quieter, with notable high-grade issuances only from Johnson Controls and Hana Bank.
Overall, cash bond spreads widened by 0.5 points to 124.2, with industrials and utilities sectors performing best, and subordinated financials and communications sectors performing worst.
Commodities:
Crude markets were steady as traders awaited Israel's response to Iran's unprecedented direct drone and missile strikes over the weekend. The May WTI contract dipped slightly by 0.15% to $85.28, and the June Brent contract decreased by 0.18% to $89.94.
Israeli military officials warned that missile strikes on Israel would provoke retaliation, adding tension to the region.
The upward trend in oil prices was limited by comments from Fed Chair Powell supporting a "higher for longer" interest rate environment and a consequent rise in the U.S. dollar.
Bloomberg reported that refineries in China and Korea are cutting back on production due to lower profit margins and scheduled maintenance.
The American Petroleum Institute (API) reported a significant rise in crude inventories by 4.09 million barrels, although gasoline stocks decreased by 2.5 million barrels.
The European diesel spread for May to June shifted into contango for the first time in 11 months (excluding expiry days), indicating that the impact of reduced Russian supplies might be waning and demand may be declining as economic activities slow.
In France, road diesel sales dropped 12% in March, further suggesting a downturn in fuel demand.
Investment Tip of The Day
Utilize strategic asset allocation to establish a baseline distribution of assets across various categories (e.g., stocks, bonds, real estate) based on your risk tolerance, investment timeline, and financial goals. This foundational strategy helps in controlling risk and optimizing returns by dictating how your investments should be diversified. Regularly revisiting and adjusting your asset allocation can keep your portfolio aligned with your changing needs and market conditions.