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European stock markets moved higher with the Stoxx 50 up to highest since November 2021, whilst the FTSE 100 rallied north of 7,900 and the FTSE MIB in Italy hit a 15-month high. The DAX and CAC both rose to their highest levels in a year, continuing the positive momentum from last week. Wall Street fell Friday but finished higher for a fourth straight week. Markets are looking ahead to Chinese GDP data on Tuesday and a slew of PMI surveys on Friday. ECB boss Christine Lagarde speaks later, whilst the latest Empire State manufacturing index is due out.


A Low Bar

Expectations for earnings are on the floor, so beats can be expected. Wall Street’s big banks delivered strong earnings last week, but they are the stronger ones. Today is quiet ahead of Goldman Sachs and Netflix tomorrow.


Dollar Up as Retail Falls

US retail sales in March fell 1% last month, double the 0.5% drop expected, but core retail sales declined by just 0.3%, raising expectations that the Fed will hike in May. The dollar trades higher this morning after touching a one-year low on Friday. Markets now price a roughly 80% chance the Fed raises rates next month with hawkish comments from the Fed’s Waller (‘pay attention to the end point’) also a factor.


Inflation Seesaw

University of Michigan year-ahead inflation expectations rose from 3.6% in March to 4.6% in April. UoM: “These expectations have been seesawing for four consecutive months, alternating between increases and decreases. Uncertainty over short-run inflation expectations continues to be notably elevated, indicating that the recent volatility in expected year-ahead inflation is likely to continue.” Given we don’t know what the Fed will do next month, it’s hardly a surprise that inflation expectations might be volatile. Last week’s US core CPI inflation – up to 5.6% from 5.5%, indicates that inflation is not going to die quietly. The long and short is the Fed will hike more than the market thinks unless there is a significant credit crunch that emerges from the banking ‘crisis’...which so far seems less likely than it might have appeared a few weeks ago.



Japan’s new central bank boss signalled that the BoJ will remain dovish even as it looks to slowly exit ultra-loose monetary policy. Speaking at the IMF and World Bank spring meetings, Kazuo Ueda said the Bank of Japan would stay the course for now and would not normalise policy quickly.


Cable – looking at a bearish MACD crossover maybe signalling the recent rally has lost steam.

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USDJPY – tentative MACD crossover confirmed – rising trend and above the 50-day SMA.

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