Market Update

This week was a roller coaster, with equity markets experiencing dramatic fluctuations. Alongside the ongoing conflict in Ukraine, heightened inflation, and China's grappling with COVID-19 lockdowns, we also had major US corporations announcing their earnings.
In brief, we began the week on a shaky note. The FTSE-100 in the UK, for instance, dipped nearly 2.5% early on. However, sentiments improved as China indicated its commitment to achieving its economic goals, hinting at potential economic stimuli.
China's Politburo, the key decision-making entity of the Communist Party, confirmed forthcoming policy support, particularly benefiting sectors impacted by COVID-19. While specifics were sparse, the intent was distinct, positively influencing market sentiment.
Chinese President Xi Jinping aims to triumph with his zero-Covid strategy while targeting a 5.5% economic expansion this year. This comes ahead of the 20th party congress, where, if he secures a third term, it would be an unparalleled move in contemporary history.
In other regions, today’s Eurozone CPI inflation stood at 7.5%. Given these figures and other similar inflationary indicators from countries like the US and UK, there's a mounting case for an interest rate hike. However, accompanying these inflation figures are some lacklustre GDP data. In Europe, for instance, Italy’s economy shrunk by 0.2% in Q1 2022, while Spain witnessed meagre growth. The US presented a similar trend, with Q1 GDP figures showing a contraction at an annualized rate of 1.4%, notably below the anticipated 1.0% growth.
As a result, all eyes are now set on the upcoming BoE and Fed monetary policy meetings. Speculation is rife, with many anticipating a 0.75% interest rate increase by the Fed.
While a hike by the Fed is probable, we lean towards a slower, steadier approach to rate adjustment. In the UK, a 0.25% rise seems to be the market's forecast, but with consumer confidence seemingly faltering due to recent energy bill hikes and tax increments, pushing rates up further might not be the wisest move.
Coming up, we'll be keenly watching the Eurozone retail sales, Chinese PMI, US ISM, US factory orders, and US job stats, which include non-farm payrolls, unemployment rate, participation rate, and average earnings. Note that Japanese markets will mostly be inactive during the week, owing to the Golden Week holiday.