Ormiga Weekly Market Update: 5th May 2023

US Stronger than expected US employment numbers released on Friday provided for a late rally but did little to cover the difficult week seen by US stock markets last week; the US economy added over 253,000 jobs in April. Despite a nearly 2% rise on Friday the S&P500 index closed the week -0.80% down, giving up almost all of the previous weeks gain; it was a similar situation with both the Dow Jones Industrial Average and the tech-heavy Nasdaq indices.

The Federal Reserve (FED), which has now raised rates by over 5% in the past 12 months again decided to raise rates this week with a further 0.25% increase. In a change to previous comments FED chairman, Jerome Powell hinted that future increases might not be so certain raising hopes that the central bank might be about to pause its current strategy.

The focus of many investors still appears to be on regional banks who have been hit by fears of liquidity issues. Early in the week some of the most affected saw share prices plummet as much as 50% and testing analysts predictions that the worst of the current market correction might be over. On Friday following Aprils jobs report and a pick up in insider buying nervousness abated and WestPac and Western Alliance, some of the worst affected, climbed 56% and 33% respectively.

Mexico On Friday the peso his its strongest level since 2017 closing the week at 17.7430 as strong jobs reports in the US was welcomed by investors and fear of a US recession. A survey by the Central Bank of Mexico (Banxico) suggests that the peso will slide to 19.16 by the end of 2023 and 19.88 by the end of 2024. Banxico has followed US rate rises so far in recent times and done a competent job of protecting the value of one of Latin Americas leading currencies. In an appearance in the Mexican Congress, the central bank’s governor, Victoria Rodríguez, indicated that she "would not be a surprise if we evaluate the possibility of stopping the increase in interest rates."

Europe In a similar vein to US markets, Europe also struggled to find footing this week with most major indices aside from Germany’s DAX closing in negative territory for the week.

Following the trend set by BP, Shell reported higher than expected profits for the first quarter of 2023 of over 9.6bn USD. The oil and gas giant said that despite falling oil prices over the past year profits had been boosted by its chemicals and refined products businesses.

The UK is set to showcase its long history of pageantry with its first royal coronation in over 70 years as King Charles III is crowned on Saturday. The event is expected to be watched by more than 500 million people around the world with an expected cost of over 125m USD. With our close English ties everyone at Ormiga towers wishes King Charles III and Queen Consort Camilla a long and happy reign. God save the King!

Asia

Asia’s stock markets faired better last week with increasing signs that recovery is gathering momentum. Japan’s Nikkei 225 closed the week up over 1% despite closing for three days for Japan’s Golden Week national holidays. Economy Minister Shigeyuki Goto said in an interview with the Reuters news agency that banking sector problems in the U.S. and Europe won’t impact Japan’s economy and financial system for now.

Chinese equities were tempered during a holiday-shortened week with surprisingly weak manufacturing data. China’s Ministry of Tourism announced that tourism levels were now 30% higher than pre-pandemic levels, yet more evidence that China’s economy might at last be turning a corner.