The string of disappointing US economic data continued yesterday, leaving stock market sentiment battered. Faced with the prospect of sharply rising key interest rates, fears of a sharp economic slowdown in the US are increasing, clouding investors' appetite for risk. On Wall Street, the Dow Jones Industrial fell yesterday to the lowest level since March 2021 and closed -0.75% lower at 31,253.13 points. The S&P 500 fell -0.58% to 3,900.79 points and on the Nasdaq technology exchange, the indices went out of trading around -0.45% lower, not far from the low since November 2020 reached last week. The mood was also weighed down by negative corporate news. For example, network equipment maker Cisco lowered its annual revenue targets due to ongoing supply chain problems. Shares then plunged nearly -14% to trade at their lowest level since November 2020.
In Asia, most stock exchanges resisted the once again negative guidance from the US and are mostly quoted in positive territory at the end of the week. The gains are led by the Hong Kong stock exchange, where the Hang Seng could increase today by about +1.8%. In Shanghai, the Composite Index trades around +1% in the plus and in Tokyo, the Nikkei 225 gains around +1.2%. China, meanwhile, announced a cut in a key interest rate on long-term loans to mitigate the current slowdown in the economy. The five-year prime rate, a benchmark for real estate loans, was eased to 4.45% from 4.6%.
In the bond market, the yield on ten-year US government bonds fell at times to 2.78%, its lowest level since the end of April. This after the yield had reached just over a week ago with 3.2% still the highest value since the end of 2018. Currently, the yield on ten-year Treasuries is trading at around 2.85%.
In Japan, the core consumer price inflation rate, i.e. excluding volatile energy and food prices, rose to +2.1% in April, exceeding the Bank of Japan's fixed target of 2.0% for the first time since March 2015. However, this is not due to stronger domestic demand, but rather to rising import prices. Japan's central bank is thus likely to come under increased pressure to abandon its long-standing ultra-loose monetary policy.
Like the New York Fed's Empire State earlier, the Philadelphia central bank's May business climate barometer also pointed to a marked deterioration in sentiment in the industrial sector. The so-called Philly Fed indicator fell more sharply than expected from 17.6 points to 2.6 points. On average, analysts had only forecast a decline to 15.0. Just above zero, the Philly Fed indicator is still pointing to moderate economic activity in the industrial region around Philadelphia.
In the US, higher house prices and increased mortgage interest rates are causing less activity in the real estate market. Existing home sales, for example, fell -2.4% in April from the previous month, the National Association of Realtors reported. The decline was already the third in a row and somewhat stronger than analysts had expected.
|08:00||UK||Retail Sales (April, m/m)||-1.4%|
|08:00||GE||Producer Prices (April, y/y)||+30.9%|
|13:45||GE||Bundesbank President Nagel speaks|
|16:00||EZ||Consumer Confidence (May)||-22.0|
|US||Deere & Co||Q1|
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Source: LGT Bank (Switzerland) Ltd.
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