US economic data in line with expectations

Market Summary

Last week, the US, UK and Europe markets closed high on Friday. Stocks experienced solid gains for the week due to positive sentiments driven by a positive tone in debt ceiling negotiations, with President Biden expressing confidence in avoiding a default.

US economic data was in line with expectations, with Retail sales rising 0.4% in April, and the consumer price index rising 5.5% over the same period. Weekly jobless claims came in at 242,000, below the previous week’s reading of 264,000. In Europe,  industrial production were below expectations as it sank 4.1% sequentially in March, after rising 1.5% in February. In UK, unemployment rate crept up to 3.9%. Despite less than favorable economic data, the likely avoidance of a default in the US allowed markets to close high this week.

In Asia, Japanese stock markets rose due to strong corporate earnings and higher than expected GDP growth in the first quarter. Meanwhile, Chinese equities fell as the country's recovery appears to weaken. Key economic data such as industrial output,  retail sales and fixed asset investment grew weaker than expected.

Major News

Republican House Speaker Kevin McCarthy expressed optimism that a bill to raise the US debt ceiling could be voted on next week, indicating progress in negotiations to avoid a potential national default.

The Bank of England Governor acknowledges the wage-price spiral in the UK economy and vows to raise interest rates as needed to combat inflation.

China's currency reached a five-month low against the dollar due to concerns about the country's economic recovery with weak economic data such as sluggish consumer spending, industrial production, and high youth unemployment in April.

What Caught Our Attention

The relationship between finance and the state is evolving, with banks facing increasing oversight from official organs. Recent events, such as the failures of Silicon Valley Bank and Signature Bank, have led to discussions about offering more generous protection for bank deposits. The state's role is expanding in areas such as deposit insurance, emergency lending, and regulation of asset quality. The growing state intervention raises concerns about the diminishing role of the private sector in assessing risk.

Digital payments systems are reshaping global finance, challenging traditional banks and cash transactions. State-sponsored platforms and new technologies are driving the shift, bringing unbanked individuals into the formal financial system. This transformation has implications for the balance of power between money and the state, as well as potential changes in financial surveillance and the reduction of Western financial influence.

Source: Kredens Capital Management, T. Rowe Price, Bloomberg, Financial Times, Wall Street Journal, The Economist, Nikkei Asia