The RBNZ maintained its hawkish bias, leaving the interest rate at 5.5%. Inflationary pressures are easing in Canada

At the end of Tuesday, the Dow Jones Index (US30) was up 0.17%, while the S&P 500 Index (US500) added 0.25%. The NASDAQ Technology Index (US100) closed positive 0.22%. The US stock indices closed moderately higher, consolidating just below last week’s alltime highs. The rise in stocks was limited by comments from Fed Representative Waller and FRB Atlanta President Bostic, who said they favored waiting for inflation to fall before cutting interest rates.

FRB Atlanta President Bostic reiterated his view that inflation will continue to decline slowly and that the Fed could likely begin cutting interest rates in the 4th quarter. Today, markets await Wednesday’s release of the minutes from the May 1 FOMC meeting to see how close the Fed is to cutting interest rates.

Tesla (TSLA) stock price rose more than 6%, leading the Nasdaq 100 higher as a coalition of Tesla shareholders urges peers to reject CEO Musk’s $56 billion compensation package. AstraZeneca Plc (AZN) closed higher by more than 2% after the company said it expects to generate $80 billion in cumulative revenue by 2030 from “significant growth” in its portfolio of existing oncology, biopharmaceuticals, and rare diseases.

The Canadian dollar weakened to 1.36 per dollar, moving away from the fiveweek highs reached earlier this month, as the latest inflation data raised bets that the Bank of Canada could start cutting interest rates as early as next month. As expected, core inflation slowed to 2.7% y/y in April, hitting the lowest level in three years, while the core rate fell for the 5th straight month to 1.6% y/y, also the lowest since 2021. The Bank of Canada kept its key rate at 5% in April. Still, policymakers recently said they needed to see further and sustained weakening in core inflation before moving to a looser policy. Odds of a rate cut in June rose to 50% from 40% before the report was published.

Equity markets in Europe were mostly down yesterday. Germany’s DAX (DE40) fell by 0.22%, France’s CAC 40 (FR40) closed down by 0.66%, Spain’s IBEX 35 (ES35) lost 0.04%, and the UK’s FTSE 100 (UK100) closed negative 0.09%.

Asian markets were mostly down on Tuesday. Japan’s Nikkei 225 (JP225) declined 0.31%, China’s FTSE China A50 (CHA50) fell 0.19% for the day, Hong Kong’s Hang Seng (HK50) fell 2.12% on Monday, and Australia’s ASX 200 (AU200) closed negative 0.15%.

The Reserve Bank of New Zealand kept the official cash rate (OCR) at 5.5% during its May 2024 policy meeting, extending the rate pause for the 7th straight time and confirming market expectations. Policymakers noted that restrictive monetary policy has eased pressure on manufacturing capacity and lowered consumer price inflation. Although the country’s core inflation fell to a nearly threeyear low of 4% in the first quarter of 2024, it remained above the target range of 1% to 3%. At the same time, the Central Bank raised its rate prognosis maximum and delayed the timing of rate cuts until the third quarter of 2025, later than its previous estimate for the second quarter.

Japan’s trade deficit widened to JPY 462.50 billion in April 2024 from JPY 429.79 billion in the same month a year earlier, exceeding market prognoses. Exports rose by 8.3% y/y, marking the fifth consecutive month of growth, mainly due to continued shipments to major trading partners, notably the US and China. Imports also rose by 8.3%, the strongest growth in 14 months, to a fourmonth high, driven by increased purchases of mineral fuels.

S&P 500 (US500) 5,321.41 +13.28 (+0.25%)

Dow Jones (US30) 39,872.99 +66.22 (+0.17%)

DAX (DE40) 18,726.76 −42.20 (−0.22%)

FTSE 100 (UK100) 8,416.45 −7.75 (−0.09%)

USD Index 104.65 +0.09 (+0.08%)

• US FOMC Member Collins Speaks at 02:00 (GMT+3);
• US FOMC Member Mester Speaks at 02:00 (GMT+3);
• Japan Trade Balance at 02:50 (GMT+3);
• New Zealand RBNZ Interest Rate Decision at 05:00 (GMT+3);
• New Zealand RBNZ Monetary Policy Statement at 05:00 (GMT+3);
• New Zealand RBNZ Press Conference at 06:00 (GMT+3);
• UK Consumer Price Index (m/m) at 09:00 (GMT+3);
• UK Producer Price Index (m/m) at 09:00 (GMT+3);
• US Existing Home Sales (m/m) at 17:00 (GMT+3);
• US Crude Oil Reserves (w/w) at 17:30 (GMT+3);
• US FOMC Meeting Minutes at 21:00 (GMT+3);
• New Zealand RBNZ Gov Orr Speaks at 23:10 (GMT+3).

by JustMarkets, 2024.05.22