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Daily Market Commentary 17th May 2024

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Equity markets continued the celebrations, following the better-than-expected US CPI inflation number, released yesterday. The prospects of Central Bank rate cuts in Europe and the US, has ignited a fire in the equity markets, with the DOW touching 40,000 for the first time ever. The S&P and NASDAQ are also exploring record all-time highs, as are some European Bourses. The prospects of interest rate cuts have emboldened market sentiment and allowed for the bulls to take charge. US Industrial and Manufacturing Production remains seriously depressed and continues to be in contraction mode, as it does in much of Europe. Energy remains a problem. The US Philly Fed Manufacturing Index was in expansion territory, but this sector remains heavily depressed and struggles. Investment appears to be flowing into equity markets but the flow into the ‘real economy’, in the form of manufacturing and industrial production remains challenging. The US Dollar and bond yields remain soft, with the EUR trading above 1.0850, while the GBP pushed up to 1.2670.

Commodity currencies are beneficiaries of a weaker reserve, with the AUD trading above 0.6650, while the NZD consolidates above 0.6100. Japanese GDP contracted sharply, confirming the recessionary economic conditions that prevail, while Industrial and Manufacturing Production suffers severe demand issues. The Japanese economy is under stress, with serious monetary problems and a potential currency crisis. Markets remain heavily focused on inflation and monetary conditions.

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