The Majors
It was a mixed week for the European majors in the week ending April-22, 2022.
The EuroStoxx600 slid by 1.42%, with the CAC40 and the DAX seeing losses of 0.12% and 0.15%, respectively.
Stats from China at the start of the week set the tone, leaving the majors in the red after the Monday holidays.
In Q1, the economy grew by 1.3%, which was softer than 1.5% in Q2. Year-on-year, the economy grew by 4.8%, picking up from 4.0% in the quarter prior.
The downward trend in industrial production continued with production up by 5.0% year-on-year. In February, industrial production increased by 7.5%.
Fed Chair Powell chatter drove Treasury yields northwards to leave the majors searching for support on Friday.
Economic data from the Eurozone was relatively upbeat but not good enough to offset concerns over supply chain disruption.
The ongoing war in Ukraine and China’s introduction of new COVID-19 restrictions added to the market angst.
The Stats
Early in the week, the Eurozone economy was in the spotlight.
The stats were market positive, though not good enough to counter hawkish Fed Chair Powell chatter from later in the week.
In February, industrial production rose by 0.7%, reversing a 0.7% decline from January. Trade data was also positive, with the trade deficit narrowing from €27.3bn to €7.6bn.
Consumer confidence was also on the rise, despite the ongoing war in Ukraine.
At the end of the week, prelim private sector PMIs for April disappointed. Germany’s manufacturing PMI declined from 56.9 to 54.1, leaving the Eurozone Manufacturing PMI down from 56.5 to a 15-month low of 55.3.
Service sector activity accelerated due to easing COVID-19 restrictions, supporting a rise in the composite PMI from 54.9 to 55.8.
From the U.S
It was a quiet start to the week, with the markets needing to wait until Thursday for the key numbers.
It was a mixed set of numbers. Jobless claims fell from 186k to 184k in the week ending April 15. The Philly Fed Manufacturing Index disappointed, however, falling from 27.4 to 17.6.
On Friday, prelim private sector PMIs for April also drew interest.
The Manufacturing PMI increased from 58.8 to 59.7, while the Services PMI declined from 58.0 to 54.7.
The mixed set of numbers came amidst some hawkish Fed Chair Powell chatter.
On Thursday, Fed Chair Powell spoke at the Annual Economic Policy Conference National Association for Business Economics.
There were two key takeaways from the Powell speech. Firstly, the prospect of a fifty-basis point rate hike.
Discussing restoring price stability, Powell said,
“If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or in meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”