Following the release of data showing a slowdown in U.S. services industry growth in March, global stocks rebounded and bond yields retreated. This data suggested that inflation may be slowing but not enough for the Federal Reserve to consider interest rate cuts. Market expectations for rate cuts as early as June were challenged this week as robust economic data pushed Treasury yields to multi-month highs. Fed chief Jerome Powell emphasized the need for policymakers to have confidence in sustained downward movement of inflation towards the 2% target.
Stocks on Wall Street and in Europe initially fell after the ADP National Employment Report revealed a significant jump in median wages for workers switching jobs in March. This increase in wages could potentially lead to inflation. However, the Institute for Supply Management (ISM) survey brought some relief as it showed a decrease in business input prices, easing concerns about inflation. Survey data like the ISM survey have been less reliable indicators of the economy compared to data on gross domestic product, employment, and retail sales, according to Joe LaVorgna, chief U.S. economist at SMBC Nikko Securities in New York.
Market Performance
Despite the initial reactions, the MSCI’s global stock gauge saw a slight increase of 0.03% while bond yields retreated. The benchmark 10-year Treasury note yield dropped 1 basis point to 4.355% after reaching a four-month high. In Europe, the pan-European STOXX 600 index rose by 0.29% following the positive ISM data.
On Wall Street, the S&P 500 experienced a small decline of 0.06%, the Nasdaq Composite gained 0.05%, and the Dow Jones Industrial Average fell by 0.3%. Atlanta Fed President Raphael Bostic advised against a benchmark rate cut until the end of the year, suggesting that policymakers should only reduce borrowing costs once in 2024.
The dollar index remained at its highest level in over four months, keeping the yen close to its lowest point in decades. Tokyo’s potential currency intervention prevented further declines in the Japanese currency. The dollar index, which measures the U.S. currency against six major trading partners, decreased by 0.45%, while the dollar gained 0.09% against the yen, reaching 151.67.
Oil prices edged higher due to supply risk considerations arising from Ukrainian attacks on Russian refineries and potential escalations in the Middle East conflict. OPEC+ ministers maintained their output policy, leading to a rise in U.S. crude settlement at $85.43 a barrel and Brent settlement at $89.35 a barrel.
In the midst of market fluctuations, gold prices saw another surge to a record high, with U.S. gold futures settling 1.5% higher at $2,315 an ounce. Meanwhile, Bitcoin also experienced a slight increase of 0.32%, reaching $65,870.00.