- Equities: Hotter-than-expected headline inflation in the US, coupled with rising tensions in the Middle East saw global equities notch another losing week
- Credit: Investors should continue to switch from cash to credit, noting that it is not the trajectory of rates that has changed with strong economic data, but the timing. The window of opportunity with fixed income remains
- FX: ECB lays groundwork for Jun rate cut, but going alone will weigh down on the EUR; Stay negative on the currency
- Rates: Prevailing rethink among market participants on where longer-run neutral rates should settle at across developed markets
- The Week Ahead: Keep a lookout for US Change in Initial Jobless Claims; China GDP Number
Related insights
Equity markets continue to see moderation in risk appetite. Global equities were down last week on the back of a mixed US inflation print for March. Headline inflation rose to 3.5% y/y, higher than the +3.2% y/y recorded in February. PCE inflation however, eased marginally to 2.7% y/y from 2.8% y/y in February. The Dow, S&P 500, and Nasdaq fell 2.4%, 1.6%, and 0.5% respectively. Major European and Asian indices were also largely down to flat, with Japan’s Nikkei and UK’s FTSE100 being notable exceptions as they notched marginal gains during the week.
Looking ahead, market sentiment continues to face pressure from rising geopolitical tensions. Iran’s drone and missile strikes on Israel over the weekend was a clear sign of escalation and could potentially spell more involvement from the US. Earnings season has also begun, with US banks and financials reporting largely positive results last Friday (12 Apr); BlackRock, Citigroup, JP Morgan, and Wells Fargo all posted beats on revenue and earnings.
Topic in focus: AxJ Equities - Resilient fundamentals and growth outlook. After a muted performance in 2023, Asia ex-Japan (AxJ) equities are poised for resilience in 2024, driven by robust 22% EPS growth, significantly exceeding the global average of 7%. This growth is evenly distributed across the region, with populist Southeast Asian countries like Indonesia and Thailand expected to deliver impressive EPS growth of 21% and 17%, respectively. Moreover, tech markets like Taiwan and Korea are expected to grow their EPS at 21% and 64% respectively, driven by the recovery of the semiconductor cycle and rising expenditure in the tech supply chain, particularly for logic and memory integrated circuits, fuelled by the burgeoning demand for AI developments.
This upbeat earnings momentum is underpinned by the promising economic growth across the region, with India, Philippines, Indonesia, and China leading the pack. Existing headwinds have been largely priced in and we remain constructive on AxJ, supported by steep valuation discounts, foreseeable Fed rate cuts, and strong earnings growth.
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