Morning Bid: One investor’s rebound is another’s bear rally

A dealer works on the ground of the New York Inventory Alternate (NYSE) in New York Metropolis, U.S., Could 13, 2022. REUTERS/Brendan McDermid/File Photograph

A take a look at the day forward in markets from Julien Ponthus.

What a distinction per week makes!

With the Dow Jones (.DJI) snapping out of its longest weekly dropping streak in almost a century and scoring its greatest week since 2020 final Friday, the narrative throughout inventory markets has swiftly moved from meltdown fears to hopes of a rebound.

However there are contrasting expectations at play: some strategists imagine the S&P 500’s (.SPX) 9% bounce again from its Could 20 lows may actually conceal a bear rally, or in different phrases, a cash entice earlier than a deeper spiral decrease.

Nonetheless, capital is making its method again to the inventory market with $20 billion flowing to fairness funds final week, the most important influx in 10 weeks, in response to BofA citing newest EPFR knowledge.

Buyers puzzled with the path of journey for equities are equally flummoxed with the U.S. greenback index falling 3% from a two-decade excessive in mid-Could.

Behind that whiff of optimism for shares and the greenback’s rivals are indicators that cooling U.S. inflation could immediate the Federal Reserve to decelerate the tempo of rate of interest hikes after the summer time. learn extra

Cash markets have rushed to chop bets in regards to the whole rate of interest hikes anticipated within the U.S. this yr from over 190 foundation factors solely not too long ago to simply over 180 foundation factors this morning.

In Britain too, regardless of expectations of 10% inflation, recession alerts are forcing a shift, with 120 foundation level of fee rises priced till June 2023 towards 165 at the beginning of Could. learn extra

After all, huge inflation drivers stay and the warfare in Ukraine may elevate power and grain costs even additional as have COVID-19 outbreaks in China the potential to deliver extra disruption to world provide chains.

This morning’s knowledge coming from Europe suggests we could not have handed peak inflation simply but: German import costs surged 31.7% in April, the strongest enhance since September 1974.

Key developments that ought to present extra path to markets on Monday:

– Swedish economic system shrinks as pandemic and warfare pinch exports

– German April import costs surge 31.7% learn extra

– Euro zone enterprise local weather/sentiment/inflation expectations

– German prelim CPI/HICP

– Kenya’s central financial institution determination

–Pool: Japan Q2, full-year development to be weaker than beforehand estimated learn extra

Reporting by Julien Ponthus; Enhancing by Saikat Chatterjee

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