It was a mixed week for markets around the world. On one hand, in Japan markets were buoyed by a supportive central bank, whereas in China, concerns over its economic recovery weighs on markets. In the UK and Europe, we continue to see talks of a recession against improving business and consumer confidence and in the US, we see further turmoil in the banking sector.

Last week’s performance – major stock markets

 

S&P 500	+0.87%
Nikkei 225	+1.02%
CSI 300	-0.09%
Euro Stoxx 50	-1.12%
FTSE 100	-0.55%

Commentary

US: Further turmoil in banking sector

It was a busy week in the US, with many companies reporting results for the first three months of 2023. Notably, returns for the week were drive by four big technology stocks. However other sectors performed poorly as signs of economic stress began appearing, notable in the manufacturing activity data. Renewed turmoil in the banking industry also heightened fears of a slowdown and possible recession. Following days of volatility, JPMorgan Chase has agreed to acquire most of First Republic Bank after US regulators orchestrated an overnight deal to shut the embattled lender.

Japan: Supportive central bank boosts sentiment

Markets were supported by a supportive Bank of Japan (BoJ), which signalled a continued commitment to ultra-low interest rates. However, the BoJ has said it expects inflation to end the year higher than they had previously expected. The government’s easing of Japan’s border controls ahead of an anticipated increase in arrivals, particularly from China, due to the Golden Week holidays (observed at the end of April and the beginning of May) also boosted sentiment.

China: Beijing vows to continue support for economic recovery

Chinese authorities have vowed to continue its “forceful” fiscal and monetary policy stance to support the economy as it faces obstacles in economic transformation and insufficient domestic demand. While China’s economy expanded at its fastest pace in a year in this year’s first quarter, policymakers remain cautious on certain challenges such as the high youth unemployment rates and slowing global growth. Data suggests that demand for manufactured goods remains week.

Europe: Mixed data pointing to recession?

Shares fell as fears that interest rate increases might tip the economy into recession intensified. The eurozone economy treaded water in the first quarter, expanding by just 0.1%. Inflation data from different countries in Europe give a mixed message on whether inflation is moderating, which could lead to further interest rate hikes. However, economic sentiment in the eurozone held steady in April amid more optimism in the consumer and retail and services sectors.

UK: UK budget deficit widens; Business confidence rises

The UK budget deficit grew to £139 billion in the year to March, up more than £18 billion from a year earlier and the highest level on record. However, the deficit is smaller than the forecast made by the Office for Budget Responsibility last month. Meanwhile, Lloyds Bank said that business confidence rose to its highest level in almost a year in April amid more optimism about the economy.