Earnings Season Overview: Robust Revenue Growth Amid Sectoral Variations
The precious metals market faces prolonged Fed tightening due to alarming inflation data, notably the PCE print. Short-term price indicators have gained Fed attention, with Chairman Powell and Vice Chairman Williams hinting at further rate hikes. This has shifted market expectations away from anticipated rate cuts, strengthening the dollar. Despite geopolitical tensions previously supporting gold, recent de-escalation and lack of catalysts may dampen bullish sentiment.
In April 2024, the Caixin China General Manufacturing PMI rose to 51.4, surpassing market expectations of 51 and marking the sixth consecutive month of expansion in factory activity. This growth, the most rapid since February 2023, was driven by increased output, which experienced its strongest growth since May 2023. Demand conditions improved, with new orders seeing their most significant increase in over a year, and foreign sales expanding at the fastest rate in almost three and a half years.
In March 2024, Japan experienced a notable upsurge in industrial production, recording a 3.8% month-over-month increase, surpassing market forecasts and marking the most significant growth since June 2022. This expansion was chiefly driven by substantial rises in motor vehicles, production machinery, and electronic parts and devices. However, the industrial sector continued to face challenges, with a 6.7% annual decline in output. Concurrently, retail sales in Japan climbed 1.2% year-on-year in March, although this growth was notably slower than in the previous month and fell short of market predictions. Nevertheless, March marked the 25th consecutive month of retail sales expansion, driven by increases in machinery & equipment, fuel, and department stores, among others, while sales of automobiles, textiles, clothing and personal goods dipped.
Germany's consumer price inflation in April 2024 remained steady at 2.2%, matching its lowest level since May 2021 and slightly below market forecasts of 2.3%. Services inflation slowed, offset by a rebound in food prices and a smaller decline in energy costs due to the end of a temporary tax cut on natural gas. The EU-harmonized inflation rate rose to 2.4%, slightly surpassing expectations, while core inflation dropped to 3.0%, its lowest since March 2022.
On Tuesday, WTI crude futures dropped to about $82.5 per barrel, extending losses from the previous session. Peace talks between Israel and Hamas eased concerns of a wider conflict in the Middle East, though Israeli airstrikes killed Palestinians. Investors are also watching for Hamas' response to Israel's truce proposal. Ongoing Houthi attacks near the Suez Canal keep markets on edge. In the US, the Federal Reserve's policy decision on Wednesday is awaited, with inflation concerns affecting expectations. Meanwhile, China's manufacturing and services sectors showed expansion in April, bolstering demand outlook.