Global Markets Weekly: U.S. Labor Market Shows Signs of Cooling, Eurozone Exits Recession

United States

• Labor Market and Economic Data: The U.S. labor market showed signs of cooling as April's nonfarm payrolls added only 175,000 jobs, missing expectations. This was the lowest addition since November. The unemployment rate slightly increased to 3.9%, and average weekly hours also saw a slight decline.
• Inflation and Wages: Wage growth slowed, with monthly increases falling from 0.3% in March to 0.2% in April, marking the slowest year-over-year gain in nearly two years at 3.9%.
• Market Response: The stock market was volatile but ended higher, buoyed by a late rally in small-caps and positive reactions to corporate earnings, notably Apple's announcement of a USD 110 billion share buyback. Tesla also saw a significant share price increase of over 15% following favorable developments in China.
• Federal Reserve's Stance: Jerome Powell, during a press conference, addressed the market’s stagflation concerns and confirmed the Fed's decision to maintain the current interest rate, citing the economy’s growth and inflation rates around 3%.
• Bond Market: The yield on the 10-year U.S. Treasury note dropped to around 4.45%, its lowest in nearly a month.
• Market Indexes:
  
  
  • DJIA closed at 38,675.68, up 436.02 points (2.62% YTD)
  • S&P 500 at 5,127.79, up 27.83 points (7.50% YTD)
  • Nasdaq Composite at 16,156.33, up 228.43 points (7.63% YTD)
  • S&P MidCap 400 at 2,929.04, up 33.80 points (5.30% YTD)
  • Russell 2000 at 2,035.72, up 33.72 points (0.43% YTD)

Europe

• Stock Market Performance: Mixed results were seen across major indexes with Germany's DAX and France's CAC 40 seeing declines, while the UK's FTSE 100 gained, driven by strong performances in mining and energy sectors.
• Economic Growth: The Eurozone economy grew by 0.3% in Q1 2024, exiting a technical recession. Core inflation slowed, boosting confidence that inflation will stabilize around the 2% target by next year.
• Interest Rates and Bonds: European government bond yields declined as concerns over further rate hikes by major central banks were downplayed.

Japan

• Stock Market and Currency: Positive returns in the stock market were noted, with the Nikkei 225 and TOPIX indexes both up. The yen strengthened against the dollar following suspected interventions by Japanese authorities.
• Interest Rates: The Bank of Japan's recent policy adjustments indicate a move away from negative interest rates, reflecting concerns over prolonged U.S. rate hikes.
• Corporate Earnings: A significant portion of large public companies reported profit increases, influenced by a weaker yen, price hikes, and a rebound in tourism.

China

• Market Movements: Chinese stocks experienced gains, with the Shanghai Composite and CSI 300 indexes both up. The Hang Seng Index in Hong Kong notably rose by 4.67%.
• Economic Indicators: Manufacturing PMI indicated expansion, although the growth in industrial profits showed signs of slowing, highlighting ongoing deflationary pressures.
• Government Policy: The Politburo signaled intentions to use monetary policy tools flexibly to support growth, including potential rate cuts.
• Real Estate Sector: The ongoing property crisis continues to impact economic sentiment, with a significant drop in new home sales reported.

Other Key Markets

• Poland: Inflation rates were slightly higher due to the reinstatement of VAT on food and the anticipated end of energy subsidies.
• Colombia: The central bank implemented a rate cut to support growth, noting a decrease in inflation and stable economic growth projections.