Today’s markets are dominated by an uncertain and worrying sentiment, which can be summarized in 3 key themes.
The stronger-than-expected US retail sales for March have further boosted expectations that the Federal Reserve is unlikely to rush into cutting interest rates this year.
As long as a strong labor market supports household demand, there is a risk that inflation will solidify.
This news has led to a sharp decline in US stocks on Monday, as the jump in Treasury yields weighed on sentiment.
Traders are now expecting a 45 basis point cut this year, down from over 160 basis points expected at the beginning of the year.
Mary Daly, President of the Federal Reserve Bank of San Francisco, stated that “there is no urgency to cut US interest rates” given the strong economy, labor market, and inflation still above the Fed’s 2% target.
A series of Chinese economic indicators have shown that the nation’s economic recovery remains uneven.
Although GDP data was a positive sign for policymakers, other results including real estate investments, retail sales, and industrial production have shown weak demand, weighing on investor sentiment.
In detail, China’s GDP in the January-March period grew by 5.3% from a year ago, faster than the 5.2% expansion in the fourth quarter of 2023.
Yet, industrial production in March rose by 4.5% year-on-year, missing the expected 6%.
Retail sales increased by 3.1% year-on-year, below the 4.6% expectations.
Geopolitical tensions in the Middle East have kept risk appetite in check, leading to higher prices for gold and oil.
Monday saw Prime Minister Netanyahu convene his war cabinet for the second time in less than 24 hours to assess a response to the Iranian missile and drone attack over the weekend.
The prospect of an Israeli retaliation has alarmed many Iranians who were already facing economic difficulties and stricter social and political controls after the 2022-23 protests.
Iran launched the attack in response to the Israeli airstrikes on its embassy complex in Damascus on April 1.
The international community is closely monitoring the situation, with the US Defense Secretary Lloyd Austin reaffirming support for Israel and American personnel, while urging restraint to avoid further escalation.
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