Reports from major banks give investors optimism about the stock market

Short-term inflation expectations in the US jumped to a nearly two-year high at the start of April on the back of higher gas prices, but consumer sentiment did rise. These patterns show that consumers are fully aware that inflation is down from its peak, but high prices still make them feel less financially secure. Despite the minutes of the central bank’s March meeting acknowledging an increased risk of recession later this year, most investors are betting that the Fed will still raise rates by another 25 basis points at its next policy meeting on May 3rd.

The big Wall Street banks started the quarterly reporting season with better-than-expected results. JPMorgan Chase & Co (JPM) jumped +7% after it reported first-quarter results that beat analysts’ top and bottom line estimates. Citigroup Inc (C) and Wells Fargo & Company (WFC) also reported better-than-expected results. The first-quarter reporting season is heating up, and results from Goldman Sachs (GS), Morgan Stanley (MS), and Bank of America (BAC), as well as Netflix (NFLX), Tesla (TSLA), IBM (IBM) and Johnson & Johnson (JNJ), are expected in this week. According to Refinitiv, analysts expect S&P 500 earnings to fall by -4.8% in the first quarter compared with the same period last year.

ECB Governing Council spokesman Mario Centeno, who is Portugal’s central bank governor, said on Friday that a quarter-point interest rate hike is the maximum that the European Central Bank should announce at its next meeting. Beyond that, either a pause or a slowdown in the pace of increases is possible. François Villrois de Galleau from the Governing Council of the European Central Bank of France reiterated his view that the cycle of aggressive interest rate rises is coming to an end. But their comments contradict the other ECB officials who are still considering a fourth consecutive 0.5% hike to combat core inflation. The core CPI, in contrast to the overall figure, continues to rise slowly.

The dollar index jumped sharply on Friday as FOMC member Christopher Waller, one of the biggest hawks, said he wanted further monetary policy tightening, despite evidence that inflation in the United States has steadily declined from the highs of recent months. The rise in the dollar has led to a rise in government bond yields. Gold is known to have an inverse correlation to government bond yields, so there has been a collapse in the price of the yellow metal. In the short-term, gold could remain very volatile. But the medium-term outlook points to a renewed historical high.

Oil markets are rising for the fourth week in a row thanks to higher demand forecasts by the IEA global energy agency for 2023. But crude oil prices lost much of Friday’s upward momentum after Fed Chief Waller spoke out in favor of further rate hikes.

Asian markets mostly rallied last week. Japan’s Nikkei 225 (JP225) gained 3.02%, China’s FTSE China A50 (CHA50) declined by 1.06%, Hong Kong’s Hang Seng (HK50) added 1.45%, India’s NIFTY 50 (IND50) jumped by 1.68%, and Australia’s S&P/ASX 200 (AU200) was positive by 1.72%.

The People’s Bank of China kept its medium-term lending rate at 2.75%, keeping monetary policy stable ahead of the key first-quarter GDP figure due to be released on Tuesday.

In the commodities market, futures on coffee (+13.17%), WTI oil (+9.26%), lumber (+9.09%), sugar (+8.45%), Brent oil (+8.44%), gasoline (+5.74%), platinum (+5.52%), silver (+5.42%), orange juice (+2.5%) and palladium (+2.45%) showed the biggest gains last week. Futures on natural gas (-4.96%) and cocoa (-1.5%) showed the biggest drop.