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Stock markets remain caught between recession and interest rate fears

After the Easter weekend, capital markets remain caught between recession and interest rate fears for the time being. Last Friday, the latest data on the US labour market were again solid. Employment growth remained at a high level and the already low unemployment rate declined again. Meanwhile, wage growth accelerated compared to last month, but weakened on a year-over-year basis. Overall, the labour market data are not yet likely to prompt the Federal Reserve to change course immediately, and financial markets are expecting a further, albeit only moderate, increase in key interest rates in May. 

Alessandro Fezzi, LGT
Reading time
5 minutes
Stock market indices
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In the US, more new jobs were created than expected in March. Excluding the agricultural sector, employment growth of 236’000 jobs was registered, slightly exceeding the consensus forecast of 230’000. Compared to February, however, job growth weakened – 326’000 nonfarm payrolls had been reported the previous month. The unemployment rate, which is determined in a separate survey, eased to 3.5% in March from 3.6% in February. This benchmark is only slightly above the 3.4% reported at the beginning of the year - the lowest level since 1969. Average hourly wages rose 4.2% for the year, easing wage pressures somewhat. In February, wages had still risen by 4.6%. 

On Wall Street, the stock market started with moderate gains after the long weekend. The Dow Jones Industrial closed 0.3% higher at 33’586.52 points and the S&P 500 gained 0.1% to 4’109.11 points. On the Nasdaq, technology stocks came under pressure at the start of trading, but then managed to stem the losses by the end. The Nasdaq indices ended Monday's trading virtually unchanged. The yield on ten-year US government bonds is currently quoted at 3.4%. 

Investors are also likely to look with one eye to Washington, where the International Monetary Fund (IMF) and the World Bank hold their spring meeting. IMF chief Kristalina Georgieva said ahead of the meeting that the IMF expects global economic growth to be historically weak in the medium term. "We expect global growth to be around 3% over the next five years, and with geopolitical tensions rising and inflation remaining high, a robust recovery is difficult to achieve," the IMF chief stressed.

Stocks in the Asia-Pacific region rose for the most part on Tuesday. In Tokyo, the Nikkei 225 rose 1.3%, led by technology and consumer cyclical stocks. South Korea's Kospi rose 1.4% after the Bank of Korea kept its key interest rate unchanged at 3.5% for a second straight session, as expected. Hong Kong's Hang Seng index gave back earlier gains to trade about 0.2% higher before the day's close. Stock markets in mainland China, meanwhile, slipped. The Shanghai Composite fell 0.5% and the Shenzhen Component was down 0.3%. China's inflation rate of 0.7% in March was lower than expected at 1.0%. The producer price index also fell 2.5% year-on-year. 

Corporate news in focus: Swiss Re and Ahold Delhaize hold their shareholder meeting and LVMH delivers Q1 sales figures.

Economic data in focus: Sentix survey of investor confidence in the eurozone in April (10:30 CET). The IMF and World Bank spring meetings are held in Washington. IMF World Economic Outlook (3:00 p.m.) and IMF Global Financial Stability Outlook (4:30 p.m.).

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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi,
Source: LGT Bank (Switzerland) Ltd.

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