Weak consumer confidence reports and declining manufacturing data put negative pressure on stock markets

The US stock indices fell yesterday amid disappointing consumer confidence data and weak company reports. The Conference Board survey showed that consumer confidence fell to a nine-month low. It should be noted that household consumption is the main driver of US gross domestic product. The US Federal Reserve Richmond's Manufacturing Index also fell to minus 10 in April, the fourth consecutive month of decline. As the stock market closed on Tuesday, the Dow Jones Index (US30) decreased by 1.10%, and the S&P 500 Index (US500) lost 1.58%. The NASDAQ Technology Index (US100) fell by 1.98% yesterday.

Investor nervousness in the banking sector returned after First Republic Bank (FRC) fell nearly 40%, to a record low, following the release of mixed first-quarter results, which showed deposit levels down $104 billion from a year ago, much more than expected. Meanwhile, United Parcel Service Inc (UPS) reported first-quarter results that fell short of forecasts, and the courier company warned that sales would remain under pressure. The company's stock was down more than 9%. Shares of PepsiCo Inc (PEP) were up more than 2%. Its quarterly results beat estimates on both the top and bottom lines. Energy stocks, in general, were the biggest drag on the stock market. The energy sector came under pressure from falling oil prices amid concerns about the impact of a potential slowdown in global growth on demand.

Equity markets in Europe were mostly down on Tuesday. German DAX (DE30) gained 0.05%, French CAC40 (FR 40) decreased by 0.56%, Spanish IBEX35 (ES35) fell by 1.18%, and British FTSE100 (UK100) closed down by 0.27% yesterday.

The ECB started cutting its balance sheet in March and is likely to accelerate the pace of so-called quantitative tightening (QT) in July. The ECB holds 4.9 trillion euros in securities for monetary policy purposes, and that amount is expected to shrink by 200 billion euros by the end of 2023.

The Confederation of British Industry's (CBI) monthly industrial orders indicator remained at minus 20 in April, unchanged from its March value. According to the survey, British factory orders and output declined due to higher inventories of finished goods, highlighting the manufacturing sector's recent weak performance and pointing to easing inflationary pressures.

A review of more aggressive Fed policy and concerns about a global economic slowdown is forcing investors to buy safe-haven assets such as the dollar and the yen, which negatively affects oil prices. A stronger dollar makes oil more expensive for foreign currency holders. Oil was down by 2% over yesterday. Oil prices are now back in their range where they were trading before the OPEC+ decision to cut production.

Asian markets traded yesterday without a single dynamic. Japan's Nikkei 225 (JP225) gained 0.09%, China's FTSE China A50 (CHA50) added 0.43% for the day, Hong Kong's Hang Seng (HK50) ended the day down by 1.71%, India's NIFTY 50 (IND50) gained 0.15%, and Australia's S&P/ASX 200 (AU200) was not trading yesterday due to the holiday.

Japan raised its official import rate for the first time in nine months as a double-digit yen depreciation from a year ago increased the cost of imported goods. Trade data released last week showed that the high cost of coal and petroleum products combined with a 16.5% yen drop from a year ago increased imports by 7.3% in March, pushing Japan's trade deficit in fiscal 2022 to a record high.

In Australia, the consumer price level rose by 1.4% in the last quarter, but year-over-year inflation declined from 6.8% to 6.3%. The quarterly rise in inflation was largely due to higher spending on health care, education, fuel, and increased spending on recreation. The RBA warned at its last meeting that any signs of tight inflation could lead to further rate hikes.

S&P 500 (F) (US500) 4,071.71 −65.33 (−1.58%)

Dow Jones (US30)33,531.72 −343.68 (−1.01%)

DAX (DE40) 15,872.13 +8.18 (+0.052%)

FTSE 100 (UK100) 7,891.13 −21.07 (−0.27%)

USD Index 101.86 +0.51 +0.50%

• – US Building Permits (m/m) at 15:00 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
• – US New Home Sales (m/m) at 17:00 (GMT+3).
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3);
• – US New Home Sales (m/m) at 17:00 (GMT+3).

by JustMarkets, 2023.04.26

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.