Market Update

Investor attention was focused on the US non-farm payrolls data released on Friday, especially with the Federal Reserve maintaining a data-dependent stance. As other key economic indicators had shown strength in recent weeks, investors were cautious on Thursday, aware that unexpected data readings could potentially delay anticipated rate cuts that many had anticipated for June.
The data revealed that the unemployment rate dipped to 3.8% in March 2024, a slight improvement from the previous month's two-year high of 3.9%. Markets found reassurance in moderating wage growth, with average hourly wages rising by 0.3% in March as forecasted. More significantly, the US economy added a robust 303,000 jobs in March, well above expectations of 200,000, marking the highest monthly gain in ten months. Following the release of the jobs report, Treasury yields climbed, and investors scaled back expectations of rate cuts later this year. However, the stock market viewed the robust jobs report positively, closing the day higher, with continued focus on the health of the economy, consumer spending, and corporate profits.
As we have emphasized, the Federal Reserve's decisions are data-dependent, and policymakers have indicated they are not in a rush to cut rates given the tight labor market and resilient economic growth. Investors will now turn their attention to next week for the release of the US CPI report for March and the Federal Reserve's meeting minutes for March. Given this week's strong labor market data, which tempered rate cut expectations, there is heightened interest in these minutes and the consumer inflation report.
The week was marked by geopolitical tensions, with oil prices rising due to escalating tensions between Israel and Iran, while major oil exporters decided to maintain production limits. In the Middle East, US President Joe Biden's call for an immediate ceasefire in the Gaza conflict during discussions with Israeli Prime Minister Netanyahu added to geopolitical uncertainties.
In Asia, markets shifted to a risk-off mode, exacerbated by a national holiday in China that led to thinner trading conditions. Meanwhile, in Japan, stocks declined as the Bank of Japan hinted that another interest rate hike might be on the horizon, particularly given the further weakening of the Yen, which has hovered around highs of 151JPY against the USD. Last month, the central bank raised short-term interest rates, moving them out of negative territory for the first time in more than seven years. While Japan's monetary policy remains highly accommodative, financial conditions are expected to remain supportive in the foreseeable future.
In Europe, economic data added to market concerns, with the Eurozone Construction Purchasing Managers' Index unexpectedly dropping to 42.4 in March from 42.9 in February, reflecting a decline in construction activity. Additionally, Eurozone retail sales fell by 0.5% in February, following a revised down figure of 0.1% in January. This disappointing performance underscored challenges facing the region's economy and raised questions about the pace of recovery.
Looking ahead to next week, key data releases include US and Chinese CPI figures, the ECB meeting on April 11 to decide on interest rates, US PPI data, UK GDP figures, and the commencement of the first-quarter earnings season.