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CHART OF THE WEEK: The most important macro chart to watch?
China's imports unexpectedly fell in March as COVID-19 curbs across large parts of the country hampered freight arrivals and weakened domestic demand. China Imports YoY change is now diverging meaningfully from Commodity prices YoY change. Could it mean lower commodity prices and lower inflation down the road?
WEEKLY SUMMARY: Mixed week for stocks as earnings season kicks off
US equity markets struggled over a holiday-shortened week as Q1 earnings reports were released. The S&P 500 and the Nasdaq closed down -0.8% and -1.8% respectively. Value stocks continued to outperform the growth style. Financials were dragged lower by JPMorgan after it missed estimates. Energy shares outperformed as crude oil prices rallied back through $100 a barrel after Russian President Putin said peace talks with Ukraine are stalled. On the macro side, March US inflation numbers showed a 8.5% y/y jump of headline inflation, slightly above consensus expectations and at a four-decade high. The core rate rose only 0.3%, below consensus expectations of around 0.5%. Stocks initially rose on hopes that inflation might be peaking, but the rally was short-lived. Another awaited number was US Retail sales which rose only 0.5% in March, below estimates and the weakest pace so far in 2022. Meanwhile, the U.S. Treasury yield curve steepened as long-end yields ticked slightly higher while softer-than-expected core CPI reading sparked demand for short-dated Treasuries. European shares rose amid some relief that the ECB did not adopt a more hawkish stance at its policy meeting. The euro fell below 1.08 against the dollar. Japanese shares gained as the yen weakened. Chinese markets retreated as a surging coronavirus outbreak in Shanghai fueled concerns about supply chain disruptions. Cryptos were volatile but the $40k support for bitcoin seems to hold.
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Most US equities indexes ended the week lower, although the tech-heavy Nasdaq Composite advanced modestly and cleared the 20,000 mark for the first time. The Russell 2000 Index recorded a second consecutive week of underperformance against the S&P 500 Index. Growth stocks posted a third consecutive week of outperformance versus value, thanks in part to gains in shares of Tesla (12%) and Alphabet (8.4%). On the macro-economic side, stagflation fears started to rise once again. Indeed, YoY CPI and PPI both accelerated. Meanwhile overall macro surprises disappointed for the fourth week in a row: on Thursday, the Labor Department reported a surprise jump in weekly initial jobless claims to a two-month high of 242,000.