Pictet North America Advisors SA

2024 Weekly Update

Calmer inflation worries

Market update, Macroeconomy, Highlights, What to watch from the Investment team of Pictet North America Advisors.

The content of this document is for information purposes only and is not to be used or considered to be an investment recommendation, or an offer or solicitation to buy, sell or subscribe to any securities or other financial instruments. It does not take into consideration the specific investment objectives, financial and fiscal situation or particular needs of the addressee. It reflects PNAA’s beliefs based on its own views of the direction of the global macroeconomic market, its investment process and other relevant factors.

Market update

The S&P 500 closed the week at 5,303.27, +1.54% higher. The Dow Jones closed at 40,003.59, +1.24%, with the Nasdaq higher by +2.11%. The volatility index VIX closed the week at 11.99 down from 12.55. The Euro Stoxx 600 surged +1.29%.

The 10-year UST closed at 4.42% down from 4.50% a week before. The yield curve is inverted with the yield spread between the 3-month and 10-year UST at -99bps. US Corporate Bond spreads: Investment Grade spreads tightened 3bps at 152bps and High Yield tightened 2bps at 325bps. German 10-year Bunds yield closed at +2.51% down from +2.52% a week before. In Europe, Corporate Investment Grade spreads widened 1bp at 123bps and High Yield remained at 342bps.

The US Dollar Index (DXY) depreciated -0.81% last week and closed at 104.45. The Euro closed at 1.0869 (+0.91%); the Yen appreciated +0.08%, closing at 155.65 and the Swiss Franc depreciated -0.29%, closing at 0.9091. Gold closed at $2,415.22 appreciating +2.32%. Oil was higher, Brent closed at $83.98 (+1.44%) and WTI at $80.06 (+2.30%).


US tariffs

The White House hiked tariffs on US$18bn of Chinese imports, which represent 4.2% of the US’s imports from China last year (US$427bn), equivalent to 0.5% of China’s global exports and 0.1% of Chinese GDP. Imports of steel and aluminum, semiconductors, and EVs will be impacted. The tariff on EVs will go up from 25% to 100%. New tariffs will take effect this year, but others not before 2026. While the tariff hikes for some product categories are eye-catching, the estimated increase in average tariff rate on Chinese goods may be no more than 1.5%, which may have limited impact on the Chinese economy.

US inflation

US April headline CPI came in at a monthly +0.3% (vs +0.4% expected). The y-o-y rate fell from +3.5% to +3.4% as expected. Core CPI came in at +0.29% (vs. +0.3% expected), with the y-o-y rate falling to +3.6% from +3.8% (as expected). This marks the lowest annual core inflation print in two years but still at uncomfortable levels for the Fed. Monthly core services inflation slowed from +0.5% to +0.4%, and core goods inflation remained negative at -0.1%. A welcome development was the deceleration in shelter rents, which fell from +0.5% to +0.4%. Core services excluding shelter (supercore) increased from +4.8% y-o-y in March, to +4.9%. This measure has been rising consistently since last October, even as the m-o-m rate slowed from +0.6% to +0.4%. On the producers’ side, headline PPI came in at a monthly +0.5% (vs. +0.3% expected), and the measure excluding food, energy and trade was also up +0.4% (vs. +0.2% expected). The previous month’s headline PPI was revised down three-tenths to show a -0.1% decline. The components that feed into the Fed’s target measure of PCE were more neutral.


Fed Chair Powell said that “we’ll need to be patient and let restrictive policy do its work”. So little acknowledgement that rate cuts were happening anytime soon, but Powell also didn’t dial up the hawkishness either. Fed Vice Chair Jefferson reflected the cautious tone of the FOMC about future rate cuts. Fed’s Barkin stated it “will take little bit more time to get inflation down”, with rates to remain at a “restrictive level”. NY Fed President Williams stated inflation data confirmed price pressures are gradually easing, but that “more evidence” is needed to have “greater confidence” in rate cuts. Similarly, Cleveland Fed President Mester said that while the latest CPI print showed a “welcome tick down”, “holding our restrictive stance for longer is prudent at this point”.

US data

April US retail sales data saw the headline print stagnate (0.0% vs +0.4% expected). This came alongside a slight downward revision to the March reading (from +0.7% to +0.6%). The retail control group, which feeds into GDP, fell by -0.3% (vs +0.1% expected), with March numbers also revised lower. So, retail sales pointing to a slow start to Q2, with signs that US consumer spending has lost some of its momentum. The NAHB housing market index fell below expectations, dropping from 51 to 45 (vs 50 expected). Weekly initial jobless claims in fell to 222k (vs 220k expected) retracing just under half of last week’s jump. But the rest of the data was on the weaker side, with continuing claims rising to 1794k (vs 1780k expected), and housing starts falling to 1360k (vs 1421k expected) with permits down to 1440k (vs 1480k expected), their lowest level since December 2022. US industrial production was unchanged in April (vs +0.1% expected), and with March revised down from +0.4% to +0.1%, whilst April import prices beat estimates, rising +0.9% m-o-m (vs +0.3% expected).

Europe rates & data

ECB central bank speakers affirmed rate cuts are likely to start in June. Latvia’s Kazaks stated he was ‘relatively fine’ with current market pricing, with the ECB likely to cut interest rates in June. France’s Villeroy reiterated this, commenting the probability of a June rate cut is ‘significant’. When it comes to the ECB’s approach beyond the June meeting, Portugal’s Centeno, a prominent dove, emphasized he would “prefer (a) gradual reduction path”, although he also sees the ‘path of reduction set to be for some time’. The German ZEW survey improved in May, with the expectations component up to 47.1 (vs. 46.4 expected), whilst the current situation reading moved up to -72.3 (vs. -75.9 expected).

China data

Chinese consumer inflation edged higher, but producer prices stayed very weak. CPI came in at +0.3% y-o-y in April from +0.1% in March and a tenth above expectations. PPI fell -2.5% (-2.3% expected and -2.8% in March). So, deflation still remains intense in manufacturing. The government plans to sell the first batch of its 1Trn yuan ($138 billion) of ultra-long dated bonds, to stimulate the economy. In monetary policy, the PBOC kept the 1-year medium-term lending facility (MLF) unchanged at 2.50%. Activity data in April show China’s recovery remained uneven. Growth in industrial production came in at 6.7% y-o-y in real terms, above expectations, but retail sales growth was at only 2.3% y-o-y in April. The housing sector showed no improvement with property investment down further to -9.8% ytd and housing prices continuing to slide. The Chinese government significantly stepped up efforts to stabilize the housing sector. One of new measures is that local governments are to procure unsold/unfinished housing units and turn them into social housing (for rent).



Most of the STOXX 600 companies have reported their results and 65% of them have beaten earnings per share (EPS) expectations. These positive surprises have been driven by strong profit margins, as only 45% surpassed revenue forecasts. Overall, Q1 European EPS fell 5% y-o-y, a much better result compared to the double-digit decline expected at the start of the earnings season. The positive surprise was driven by stronger than expected numbers in energy (-21% growth vs. -40% expected) and industrials (-25% growth vs. -34%). At a sector level, most sectors exceeded EPS expectations, particularly Telecom, Banking, Basic Resources, and Healthcare. Although overall sales results were somewhat disappointing, they showed signs of improvement from the previous quarter. Consensus for Q2 growth has turned positive over the course of the season. Investors now expect EPS growth of 3% y-o-y, suggesting that quarterly earnings growth likely troughed in Q3 last year, at -12%. In the US, earnings growth has significantly improved with the S&P 500 now showing a 7% increase. From the companies providing guidance, 60% are forecasting a negative outcome, an improvement from previous quarters.

What to watch

  • Monday: China 1-yr and 5-yr loan prime rates; Japan Tertiary industry index (Mar.)
  • Tuesday: US Philadelphia Fed non-manuf. (May); Germany PPI (Apr.); Euro zone current account (Mar.), trade balance; Canada CPI (Apr.)
  • Wednesday: US existing home sales (Apr.), FOMC meeting minutes; UK CPI (Apr.); Japan Trade balance (Apr.); Euro zone new car registrations (Apr.)
  • Thursday: US, UK, Japan, Germany, France & Eurozone PMIs (May); US new home sales, initial jobless claims; Eurozone consumer confidence (May)
  • Friday: US Durable goods orders (Apr.); UK GfK consumer confidence (May), Retail sales (Apr.); Japan CPI (Apr.); Germany GDP (Q1)