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Week in Review: 17-21 April 2023

Summary and Comment

This was yet another calm week on the US markets, with no special economic highlights except for the preliminary estimate of building permits, which tumbled 8.8 percent to a seasonally adjusted annual rate of 1.413 million in March 2023.

Over in China, the economy advanced 4.5% YoY in Q1 of 2023, accelerating from a 2.9% growth in Q4 and topping market estimates of 4%. It was the strongest pace of expansion since Q1 of 2022, amid efforts from Beijing to spur the post-pandemic recovery. Retail sales growth was at a near 2-year high in March, industrial output rose the most in 5 months, and the surveyed jobless rate fell to its lowest in 7 months. Data released earlier showed exports from China unexpectedly rebounded in March, and the trade surplus came larger due to efforts to deepen trade with developed countries and explore new possibilities with emerging economies. 

In the UK, YoY inflation rate is still high, at 10.1%, and unemployment rate is steady at 3.8%.

For the week, stock markets are essentially flat, with variations of ~0.1% in most of the indices (SPX, NSDQ, VALUG, NYE). The RUSSEL 2000 advanced ~0.6% for the week. Gold is now under 2000$/oz, having lost ~1% this week, and silver followed the same trend. It seems the metals are undergoing a consolidation or a slight correction from an overbought condition. Oil was under pressure this week (WTI tumbled 5.7%), while natural gas advanced 7.3. The battle between the forces of supply and demand is unclear in the energy markets, as the China re-opening offsets the prospects of a slowing economy in the West.

The relative strength of the US dollar is unchanged. The US 10-year yield rose ~1.6% this week, and the yield curve is peaking at 5.11% in July 2023.

We are of the opinion that the tightening of credit by banks and the increase in interest rates will soon cause stress in a considerable number of smaller companies, which cannot get financing. This will possibly compromise their continuity and lead to a widespread increase in unemployment. The outlook for business and the fundamentals of the stock market are not positive. However, US elections are coming, and a big recession would not be nice for the headlines. Furthermore, we have been watching other central banks slowing or pausing interest rate hikes. We will have to be patient and await for the soft/hard landing of the economy.

Source of economic data:

https://tradingeconomics.com/

 

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