Barclays Bank analysts highlight concerns over China’s growth momentum in the second quarter, citing the latest factory data for April. The official Purchasing Managers’ Index (PMI) fell to 50.4 from 50.8 in March, indicating slower expansion and reflecting signs of weak domestic demand. Analysts note a gloomier outlook for China’s domestic developments, including falling industrial profits and a deteriorating labor market. The slowing services PMI further underscores fading recovery momentum in the services sector, raising questions about the sustainability of China’s economic growth trajectory.
Federal Reserve Chair’s Outlook on Interest Rates:
Ahead of the Federal Reserve’s monetary policy decision, Pictet Wealth Management weighs in on Federal Reserve Chair Jerome Powell’s likely stance on interest rates. The firm suggests that Powell may emphasize the need for a longer period to achieve the confidence required to consider interest rate cuts. Recent economic data indicating fewer and later rate cuts, coupled with firmer-than-expected inflation readings, could prompt the Fed to delay rate adjustments. Powell is expected to reiterate that monetary policy will remain data-dependent, with evolving economic indicators guiding future rate decisions.
Gilt Yields Edge Up Amid Fed Meeting Anticipation:
UniCredit Research analysts discuss the modest rise in gilt yields alongside eurozone government bond yields as investors await the Federal Reserve meeting announcement. While the eurozone’s macroeconomic agenda is busy with GDP figures and CPI data, attention is expected to shift to the FOMC meeting. Stronger-than-expected U.S. economic data has delayed anticipated interest rate cuts by the Fed, with a rate cut before August now deemed unlikely. As a result, gilt yields experience a marginal increase, reflecting market sentiment and expectations regarding future Fed policy adjustments.
Coca-Cola HBC’s Solid First Quarter Performance:
Citi analysts provide insights into Coca-Cola HBC’s first-quarter performance, highlighting the company’s positive volume and sales figures, which exceeded consensus expectations. Despite maintaining its full-year guidance, Coca-Cola HBC’s results show little incremental benefit from recent foreign exchange movements, particularly in Nigeria. However, with the absence of significant negatives and the resumption of the company’s share buyback program, analysts remain optimistic about its future prospects, contributing to a 2% increase in share price.
Dollar Strength Fueled by Economic Data Anticipation:
ING currency analyst Francesco Pesole discusses the potential for the dollar to appreciate based on anticipated U.S. employment cost index data. Expectations for a further increase in wage inflation in the first quarter could bolster the dollar, particularly if the data exceed consensus forecasts. However, market dynamics, such as Japan’s potential intervention to support the yen or higher-than-expected eurozone inflation figures, could dampen the dollar’s upward momentum. Despite potential headwinds, the dollar index rises by 0.3%, reflecting investor sentiment and market expectations.
TD Securities Forecasts Dollar Strength Through 2025:
TD Securities strategists provide a medium-term outlook for the dollar, upgrading its profile through 2025 due to factors such as U.S. inflation resurgence and relative rate divergence. Heightened geopolitical uncertainty and reduced FX volatility ahead of the U.S. elections further support a positive outlook for the dollar. While market positioning remains long on the dollar, making it susceptible to pullbacks on weaker data surprises, TD Securities views such setbacks as buying opportunities, particularly against other G-10 currencies.
Eurozone Economic Growth Outlook:
ING economist Charlotte de Montpellier offers insights into France’s economic growth trajectory, suggesting that sustained uptick in growth may be unlikely. Despite an uptick in growth at the start of the year driven by stronger domestic demand, signs of a robust acceleration in growth remain scarce. Bleaker business sentiment and worsening consumer confidence, coupled with fiscal policy constraints, pose challenges to sustained economic expansion. While lower inflation could potentially boost purchasing power, tighter fiscal policy may counterbalance growth prospects in the near term.
Japanese Stocks Gain Amid Earnings Optimism:
Japanese stocks close higher, buoyed by gains in electronics, machinery, and auto sectors, despite uncertainty over the Federal Reserve’s policy outlook. Mitsubishi Electric’s optimistic fiscal-year net profit projection and upbeat 1Q earnings from Samsung Electronics contribute to positive market sentiment. However, caution prevails ahead of the Fed’s policy meeting, with investors monitoring earnings releases and potential policy announcements. The Nikkei Stock Average rises by 1.2%, signaling optimism in the Japanese market amidst global economic uncertainties.
