Global Financial Markets
Global equities ended the trading week deep in losing territory, with a raft of disappointing US economic news dampening investor sentiment. The unfavorable economic numbers decimated investor risk appetite and propeled demand for the safety of government debt. The US dolar weakened against major currencies during the week as weak economic numbers pointed towards the extension of the Federal Reserve’s low interest rate policy.
Global equities ended the trading week deep in losing territory, with the raft of disappointing US economic news in job creation and in the services sector dampening investor sentiment. Moreover, US equities succumbed to profit-taking as the earnings-led rally that propelled the market for the past two weeks sputtered with the sharp decline of oil prices. During the week, global equities surrendered 2.13%, while the Dow Jones Industrial Average and S&P500 Index notched down 1.40% and 1.87%, respectively.
The US Labor Department reported that initial claims for jobless benefits surprisingly surged to new highs since August 14, 2010. New claims escalated to 43,000, or a seasonally adjusted 474,000 in the week that ended April 30, significantly above the 410,000 market estimate of analysts.
The Institute for Supply Management’s index for services showed that the American service sector unexpectedly sank in April. The gauge came in at 52.8, well-below analysts’ estimate of 57.5 and the 57.3 March reading. The institution attributed the slow growth to weak consumer demand caused by rising fuel and raw material prices.
Global Bonds
Unfavorable economic numbers in the US decimated investor risk appetite and propelled demand for the relative safety of government debt. The drop in rates was led by the long-end of the yield curve, which declined by an average of 16 basis points week-on-week.
Across the Atlantic, Portugal accepted the European Union and International Monetary Fund’s EUR78 billion bailout package. Under the bailout package, the nation was required to attain a budget deficit of 5.9% of its gross domestic product (GDP) in 2011, 4.5% in 2012, and 3.0% in 2013. In 2010, the country’s fiscal shortfall stood at 9.1% of GDP.
Currencies
The US dollar weakened against major currencies during the week as weak economic numbers pointed towards the extension of the Federal Reserve’s low interest rate policy. The US dollar hit a 17-month low against the euro at $1 .4940 during the week before slightly recovering.
Commodities
Crude oil continued to retreat after US data showed a larger-than-expected rise in crude stocks. New York's main contract, light sweet crude for delivery in June, shed 35 cents to $108.89 a barrel while Brent North Sea crude for June delivery dipped 9 cents to $121.10.
The week ahead (May 9– May 13)
Market players will look to a heavy economic calendar this week, headlined by the release of the latest readings on whole sales inventories, initial jobless claims, producer prices, retail sales, and inflation.
Equities seem to have taken their cues largely from macroeconomic trends over the past week, and we expect this to continue in the near-term. Bond markets will certainly receive more support and buying interest if economic numbers persist to disappoint.
Source: www.bpi.com.ph - https://www.affordablecebu.com/