Dominating the headlines last week were reports that Consumer prices measured by the Consumer Price Index (CPI) increased 8.5% in March, reaching a new four-decade high. On a monthly basis, prices jumped by 1.2% in March which is the largest monthly increase since September 2005. About 70% of March’s increase can be tied to energy prices following the Russian invasion of Ukraine. The core rate, excluding food and energy, rose only 0.3% for the month, below the 0.5% estimate. While this is a classic indicator of inflation, investors are hoping this marks the peak, especially as the Fed works aggressively to fight it with further planned interest rate increases.
Q1 earnings season is underway, with quarterly reports due this week from Bank of America, Johnson & Johnson, Netflix, IBM, Tesla, Procter & Gamble, AT&T, American Express, and others. So far, it’s been a mixed bag. Goldman Sachs, Citi, Morgan Stanley, and Wells Fargo were the first large US banks to report. All four beat expectations but reported steep losses.
Elon Musk offered to buy Twitter for $43 billion so it can be ‘transformed as a private company’. This comes a week after revealing a 9.2% stake in the company. That sent Twitter’s stock up and down, ultimately posting a loss for the day with Tesla’s stock dipping more than 3.6% on the news
In this holiday-shortened trading week, the Labor Department reported on Tuesday that consumer inflation (CPI) for March jumped to 8.5% up from 7.9% the previous month. A handful of major U.S. banks kicked off earnings season with mixed results. Expectations going into this reporting season are modest. While S&P 500 year-over-year earnings and sales growth for 2021 benefitted from comparisons with Covid-ravaged 2020, results will face difficult comparisons in 2022. While market returns were muted on the back of the latest data releases, the reports were broadly in line with expectations.
European shares rose amid some relief that the European Central Bank (ECB) did not adopt a more hawkish stance at its policy meeting. Core Eurozone bond yields were volatile and ended higher amid speculation around the ECB policy meeting. UK and peripheral Eurozone bond yields broadly tracked core markets.
In the UK, economic recovery showed signs of faltering while inflation continued to accelerate. UK financial markets indicated traders expect the Bank of England will raise its key interest rate by a quarter point to 1.0% in May.
France’s 2022 presidential race is down to the same 2017 candidates: incumbent Emmanuel Macron and the far right’s Marine Le Pen. In the first round Macron won almost 28% of the vote, and Le Pen won slightly over 23%. Le Pen’s result and subsequent tightening opinion polls suggest she is the closest ever to winning power for the far right in France. Both contenders will face each other in the second round on April 24 and French voters have a big choice to make on public services, immigration, and foreign policy.