Global Markets: Shares rebound, Treasury yields rise on stronger data

Broadmark Realty Capital

17/05/2022 22:04

(Adds close of U.S. market)
    * Stocks gain on retail sales, China optimism
    * Dollar slips as risk appetite returns
    * Crude retreats on Fed tightening concerns
    * Powell maintains hawkish Fed message

    By Herbert Lash
    NEW YORK, May 17 (Reuters) - Global equity markets rallied
and Treasury yields rose on Tuesday, as solid U.S. retail sales
in April suggested economic growth might strengthen, as did an
easing of China's lockdowns to contain the COVID-19 pandemic.
    U.S. retail sales rose 0.9% last month while data for March
was revised higher to show sales advancing 1.4% instead of 0.7%
as previously reported, the Commerce Department said.
 urn:newsml:reuters.com:*:nL2N2X81TV 
    The data show U.S. consumers weathering inflationary
headwinds as sales gained for the fourth consecutive month, said
Jeffrey Roach, chief economist for LPL Financial. Sales are
nominal, so much of the increase is from higher prices, he said.
    "We expect a rebound in economic growth in Q2," Roach said
in an email, if prices moderate enough to relieve some of the
pressure on consumers. 
    U.S. and European stocks rallied following gains overnight
in Asia. MSCI's gauge of stocks across the globe  .MIWD00000PUS 
closed up 2.0%. The pan-European STOXX 600 index  .STOXX  rose
1.22%. 
    On Wall Street, the Dow Jones Industrial Average  .DJI  rose
1.28%, the S&P 500  .SPX  gained 1.89% and the Nasdaq Composite
 .IXIC  advanced 2.57%. Growth stocks  .IGX  rose 2.48% while
value  .IVX  shares gained 1.60%.  .N/C  
    The gains were a rebound from overselling last week, said
Anthony Saglimbene, global market strategist at Ameriprise
Financial, citing the sixth straight weekly loss for the Nasdaq
and S&P 500. 
    "There's this battle in the stock market between what breaks
first: inflation or the consumer. The stock market is betting
that the consumer is going to break and credit markets are
betting that inflation is going to break first," he said.
    "The stock market is getting close to overcorrecting and
pricing in the probability of a recession that I think is just
too high," Saglimbene said.
    Data also showed industrial production rose 1.1% in April,
with the manufacturing capacity utilization rate at its highest
since 2007. The sector is running too hot and needs to slow for
inflation to get under control, said Bill Adams, chief economist
for Comerica Bank.
    The Federal Reserve will raise the federal funds rate half a
percentage point at each of its next two policy meetings to
throw some sand in the economy's gears, Adams said in an email.
    The U.S. central bank will "keep pushing" to tighten U.S.
monetary policy until it is clear inflation is declining, Fed
chair Jerome Powell said at a Wall Street Journal event.
    "What we need to see is inflation coming down in a clear and
convincing way," he said. "If we don't see that, we will have to
consider moving more aggressively" to tighten financial
conditions.
    The Fed is behind the curve and trying to play catch up,
said Brian Ward, chief executive of Broadmark Realty Capital Inc
 BRMK.N . 
    "We are trying to address a very complex set of facts with a
very blunt instrument via monetary policy and I think that it's
not going to turn out well," Ward said.
    The yield on 10-year Treasury notes  US10YT=RR  rose 10.7
basis points to 2.986%.
    The dollar eased for a third straight day, pulling back from
a two-decade high against a basket of major peers, as an uptick
in risk appetite cut the greenback's safe-haven appeal.
    The dollar index  =USD  fell 0.787%, with the euro  EUR=  up
1.07% to $1.0543. Japan's yen weakened 0.14% to 129.36 per
dollar.
    Fears remain about the strength of the world's two largest
economies after weak retail and factory figures in China and
some disappointing U.S. manufacturing data.  urn:newsml:reuters.com:*:nL2N2X8047.
    An index compiled by U.S. bank Citi that monitors whether
economic data comes in better or worse than economists had been
expecting is back in negative territory.
    
      
    Crude oil gave up gains on news Washington may ease
restrictions on Venezuela's government, and prices fell further
when Powell began to speak on concerns a Fed policy error could
slam the economy and reduce energy demand.  urn:newsml:reuters.com:*:nL2N2X91R6
    U.S. crude futures  CLc1  fell $1.80 to settle at $112.40 a
barrel and Brent  LCOc1  settled down $2.31 at $111.93 a barrel.
    Gold fell as the robust U.S. retail sales data and
likelihood of aggressive Fed rate hikes outweighed support from
a weaker dollar.
    U.S. gold futures  GCv1  settled up 0.3% at $1,818.9. 
    Hopes that China might ease lockdowns after Shanghai
achieved the long-awaited milestone of three straight days with
no new COVID-19 cases outside quarantine zones.  urn:newsml:reuters.com:*:nL5N2X903J
    Mainland China's CSI300 Index  .CSI300  gained 1.25% while
Hong Kong's Hang Seng Index  .HSI  rose 3.27%, as tech firms
listed in the city  .HSTECH  jumped nearly 6% on hopes of
Beijing's crackdown on the sector being relaxed.  urn:newsml:reuters.com:*:nL2N2X903A

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World FX rates YTD    http://tmsnrt.rs/2egbfVh
Global asset performance    http://tmsnrt.rs/2yaDPgn
Negative surprises    https://tmsnrt.rs/39sqV4O
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 (Reporting by Herbert Lash; Additional reporting by Lawrence
White in London and Scott Murdoch in Hong Kong; Editing by
Lincoln Feast, Kirsten Donovan, Barbara Lewis, Jonathan Oatis
and David Gregorio)
 ((herb.lash@thomsonreuters.com; 1-646-223-6019; Reuters
Messaging: herb.lash.reuters.com@reuters.net))
 
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