This is our latest weekly market update.
Another wild week on the markets, driven by conflicting data, and a reactive FED, who has effectively given up on forward guidance, and who does not know where rates will go. But despite Powell’s protests to the contrary, some are suggesting Central Bankers are being swayed by political considerations from driving rates higher to quash inflation.
Apart from more strong big tech results this week, two events shaped the week. It started with fears of higher rates and inflation, driven by hot economic data, but turned after the FED held rates, and ruled out rate hikes, waiting for more data. Stubbornly high readings on inflation this year pushed Federal Reserve Chair Jerome Powell to say on Wednesday that it will likely take “longer than previously expected” to get enough confidence about inflation to cut interest rates.
But then in a “bad news is good news” swing, the Friday jobs report came is softer than expected in April, a sign that persistently high interest rates may be starting to take a bigger toll on the world’s largest economy.
In Australia the benchmark S&P/ASX 200 rose 0.55 per cent, to 7629 points to finish the week 0.7 per cent higher. The central bank on Tuesday is widely expected to keep the cash rate at a 12-year high of 4.35 per cent, but it may also reintroduce a soft tightening bias following last week’s hotter-than-expected inflation report.
But at the end of another volatile and rudderless week, markets remain on edge, waiting for the next big shiny bit of news – of course big players benefit from these changes in sentiment, but ordinary investors will be perhaps rightly more cautious. Expect more rapid changes in trajectory in the weeks ahead, as data will continue to confuse. Meantime, the credibility of Central Bankers continues in my eyes to diminish, even as more ordinary households are being crushed. And more on that subject in my live stream on Tuesday.
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