The Long and Short of it, week ending 28 April 2023
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Major stock-market indexes moved slightly higher last week powered mainly by better-than-expected big-tech earnings reports. Markets struggled early in the week, however, following First Republic Bank’s earnings report detailing extremely large ($100 billion) deposit outflows as well as on consumer confidence falling to a 9-month low. Renewed concerns of systemic banking problems drove stock markets lower while increasing safe-haven demand for the U.S. dollar and U.S. Treasuries. Better-than-expected earnings reports from Meta Platforms and Microsoft boosted stock prices while weak guidance from Amazon helped to pressure prices lower. Thursday’s smaller-than-expected GDP release, overshadowed by META’s earnings report, worked to lower expectations of a Fed rate hike at next week’s FOMC meeting, supporting markets as well. Friday’s PCE Price Index release while revealing cooling inflation overall still showed somewhat resilient inflation with the core PCE Price Index level coming in as expected MoM but slightly higher on YoY basis, helped move stock indexes higher as well. First Republic Bank moved sharply lower Friday with growing expectations of FDIC involvement, mitigating broader market fallout. For the week, the S&P 500 Index increased 0.9% to 4,170.20, the Nasdaq Composite Index rose 1.1% to 12,200.07, the Dow Jones Industrial Average gained 0.9% to 34,098.95, the 10-year U.S. Treasury rate fell 14bps to 3.43% and the U.S. dollar (as measured by the ICE U.S. Dollar index – DXY) weakened 0.2%.
European stock markets moved lower last week hindered by poor performing bank, healthcare and energy/mining stocks. Bank stocks set the tone for the week with UBS reporting a sharp decline in net profits and NatWest reporting deposit withdrawals of £20 billion. Healthcare stock added to last week’s malaise as the EU works to revamp laws covering the pharmaceutical industry, reportedly to the industry’s disadvantage. Falling oil and metals prices pushed energy and mining stocks lower also hampering European stock market performances. Still, better-than-expected earnings reports and higher oil prices Friday pushed both the STOXX 600 and FTSE 100 Indexes higher, the only day of the week to record a gain. Weaker-than-expected euro zone GDP growth, coming in front of next week’s ECB rate decision, may have supported stock markets as well with investors hoping for an easing of ECB monetary policy. For the week, the STOXX 600 Index decreased 0.5%, the FTSE 100 Indexes declined 0.6%, the 10-year Gilt rate decreased 4bps to 3.72%, the 10-year Bund rate fell 17bps to 2.32%, the British pound and euro strengthened 1.1% and 0.3%, respectively, both with respect to the U.S. dollar.
Top performing ETPs over the week
| . | 3x Long ETPs | 3x Short ETPs | ||
|---|---|---|---|---|
| UK | +3x Vodafone (3LVO) | +17.4 % | -3x Glencore (3SGL) | +13.2% |
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The Long and Short of it, week ending 28 April 2023
