Apr 16 2024: On Tuesday, Asian stocks took a hit while the dollar surged to more than five-month highs following stronger-than-expected U.S. retail sales data for March. The robust sales figures reinforced the belief that the Federal Reserve is unlikely to rush into interest rate cuts this year.
Simultaneously, geopolitical tensions in the Middle East buoyed gold and oil prices, with China’s first-quarter GDP growth of 5.3% surpassing analysts’ estimates but still revealing weaknesses in key economic indicators like property investment and retail sales.
Market strategist Yeap Jun Rong from IG in Singapore noted that despite the positive GDP data, persistent weaknesses in certain sectors raise uncertainties about sustained growth momentum.
In response, China stocks declined, mirroring the broader market sentiment, while indices across Asia-Pacific plunged more than 2%, signaling a somber mood extending into European markets as well.
The backdrop of rising tensions between Iran and Israel added to the cautious stance, contributing to lower U.S. stock market performance on Monday and continued pressure on global markets.
Key highlights include:
U.S. retail sales surged by 0.7% in March, exceeding economist forecasts, adding to the narrative of a resilient economy and reduced expectations of significant rate cuts.
The yield on 10-year Treasury notes reached a five-month high, boosting the dollar’s strength and keeping the yen near 34-year lows.
Mary Daly from the San Francisco Federal Reserve emphasized that there’s no urgency to cut U.S. interest rates given the robust economic and labor market conditions.
The dollar index touched a five-and-a-half month high, while the yen weakened further, prompting concerns about intervention and central bank actions.
Oil prices rose amid escalating tensions in the Middle East, with U.S. crude reaching $85.96 per barrel and Brent at $90.65.
In conclusion, the market sentiment reflects a cautious approach driven by geopolitical uncertainties, strong U.S. economic indicators, and expectations of sustained interest rates, particularly in light of geopolitical tensions and economic vulnerabilities.
