U.S. Equity Markets finished the week lower, led by the 1.22% fall in the in NASDAQ 100. This is the first time since 2008 that the S&P has closed lower for five consecutive weeks. April’s job gains were greater than Wall Street’s projections. And despite a weaker expectation when compared with March, the figures held steady. According to the U.S. Bureau of Labour Statistics’ (“BLS”) Job Openings and Labour Turnover Survey, Non-Farm payroll data showed there were 428,000 new hires last month versus the anticipated 380,000. This suggests that the domestic economy is continuing to see steady growth as the labour market remains constricted. However, it also indicates that with more people working, consumers are spending on a variety of goods – driving demand above present supply levels and contributing to present inflationary pressures. Meanwhile, Central bank interest-rate hikes and global economic growth are on a collision course… Inflation keeps rising. In the past month, we have received confirmation from domestic economic data. The Bureau of Labour Statistics’ Consumer Price Index (“CPI”) for March rose 8.5% compared with last year. And the Bureau of Economic Analysis’ Personal Consumption Expenditures surged by 6.6%. Either way you slice it, each of those measures marked the highest growth in prices in over four decades. The change means businesses and households have to pay more for everything. All of a sudden, trips to the grocery store and the office have become more expensive. But it is not just happening in America. The rest of the world is experiencing the same problem. Late last month, Germany’s preliminary consumer prices for April shot up 7.4%. Those were the worst numbers for Europe’s largest economy since its reunification in 1990… And in mid-April, Great Britain reported CPI growth for March of 7%. It has not seen those types of numbers since the start of 1992… And the primary tool for central banks to combat inflation is raising interest rates. By doing this, policymakers are hoping to make their respective currency more valuable. The idea is that as their sovereign debt yields more, investors will clamour to buy up those bonds. In the process, the currency will become scarce, driving up its value. Yet, as it costs more to borrow money and service debt, households and businesses will borrow less. At the same time, they will want to hang on to more U.S Dollars. The change will hurt their propensity to spend. This will weigh on the outlook for global growth and the S&P 500 Index. European Markets closed lower. European Central Bank Governing Council member Olli Rehn said it should commence rate hikes in July and exit below zero policy by this fall. European Central Bank Governing Council Member Robert Holzmann said it is likely to discuss interest rate hikes and the necessary course of action at the policy meeting in June. German Industrial Production’s March contraction was worse than expected as supply-chain disruptions weighed on businesses’ ability to access parts and materials. French first-quarter private-sector payroll growth was stronger than estimated, indicating a tightening in the country’s labour market. In Asia, Japanese Prime Minister Fumio Kishida said he wants the U.S. to re-enter the Trans-Pacific Partnership Agreement to counter Chinese influence in the region. Chinese Premier Li Keqiang pledged the government would ensure stable manufacturing production to east port congestion, boost lending, and support economic growth. The European Chamber of Commerce in China said Beijing’s zero-tolerance COVID-19 policies are causing companies to consider moving business elsewhere. The Reserve Bank of Australia’s quarterly monetary policy outlook said it will need to raise interest rates as inflation is anticipated to remain above estimates in 2022 and 2023. Elsewhere, Oil rose 2.03% after China’s largest refiner said it has no intention of purchasing cheap Russian oil, indicating the flow of Russian supply will remain subdued worldwide, while Gold rose 0.43% on Equity Market weakness.
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