The IMF cut its global growth forecast for 2022 to 3.6%, down 0.8% since its January projections, saying “global economic prospects have been severely set back, largely because of Russia’s invasion of Ukraine”.
Global shares fell as bond yields soared with both the US Federal Reserve and European Central Bank appearing to turn more hawkish.
Nestlé has increased prices for its products by more than 5% in the first three months of the year, in the latest sign of steep commodity inflation feeding through to consumer prices for branded goods. Procter & Gamble said it had also increased prices by 5% in the first quarter, helping it to achieve its strongest sales growth in two decades, while Heineken, the world’s second-largest brewer, reported price rises of 5.2%.
The FTSE 100 declined 1.2% over the week.
UK retail sales fell 1.4% in March, the second consecutive monthly decline as inflation starts to bite. Online sales declined 7.9% in March as households cut back on discretionary spending while fuel sales also fell 3.8% with evidence suggesting that some people reduced non-essential journeys following record-high petrol prices.
GfK’s UK consumer confidence index plunged to a 14-year low and came close to all-time low, reflecting the impact of the cost-of-living crisis.
Andrew Bailey, governor of the Bank of England, admitted the Bank needed to tread a “very fine line” between tackling inflation and tipping the economy into a recession.
The S&P Global/CIPS Flash UK Composite PMI fell to 57.6 in April, the lowest since January, as escalating costs offset the boost to consumer spending from the ending of COVID-19 restrictions.
MPs backed a parliamentary investigation into whether Boris Johnson deliberately misled the House of Commons over the “partygate” scandal.
The S&P 500 slipped 1.7% over the week, while the tech-heavy Nasdaq lost 2.8%. The Cboe’s Vix volatility index climbed to a one-month high of 28.3.
Federal Reserve chair Jay Powell said 50bps interest rate rise was “on the table” in an effort to combat soaring inflation, sending his strongest signal yet that the Fed would raise borrowing costs rapidly to fight the highest US consumer price increases for 40 years. James Bullard, president of the St Louis branch of the Fed, also on Tuesday said that a jumbo 75bps increase may come at some point this year.
The flash estimate of the S&P Global US Composite PMI fell to 55.1 in April, down from 57.7 in March, marking the lowest reading in three months due to the impact of inflation on customer spending.
Netflix plunged after reporting its second-quarter earnings, which detailed a drop in subscribers for the first time in more than a decade. But Tesla and American Airlines issued upbeat earnings reports.
The Nikkei 225 gained 0.1% over the week.
The FTSEurofirst 300 fell 1.4% over the week.
Luis de Guindos, European Central Bank vice-president, said that, dependent on data, the first eurozone rate rise in more than a decade was “possible” from July.
The Bundesbank warned that an immediate EU ban on Russian gas imports would dent Germany’s GDP by 5% in 2022. Under German law, industrial users would be cut off from gas deliveries first should supply fall short of demand, with households who use it for heating and warm water generation getting preferential treatment.
German producer prices surged 30.9% year-on-year in March, their fastest rate of increase in at least 73 years.
France went to the polls to decide whether Emanual Macron or Marine Le Pen would become president for the next five years.
The S&P Global Flash Eurozone Composite PMI unexpectedly increased to 55.8 in April from 54.9 in March. The reading pointed to the strongest growth in seven months, as services sector activity rebounded to an eight-month high, helped by the easing of COVID-19 restrictions, while manufacturing activity held steady.
CNOOC jumped more than 40% on its Shanghai debut IPO as the oil and gas producer completed China’s biggest stock market listing of the year after being forced to delist in the US over national security concerns.
China’s central bank unveiled measures to support the economy after official data highlighted the worsening impact of a wave of lockdowns on consumer activity. The 23 measures, which were published late on Monday, encouraged financial institutions to support local government infrastructure projects and the country’s struggling property sector, as well as provide financial services to industries hit by the pandemic.
Mexico’s president Andres Manuel Lopez Obrador has nationalised the country’s lithium reserves: lithium is needed fir rechargeable batteries in EVs.
The yield on the 10-year US Treasury bond closed the week up 7bps at 2.90%, close to its highest level since late 2018, while the yield on the two-year note jumped 21bps to a fresh three-year high of 2.68%. Financial markets are now pricing in a fed funds rate of 2.8% by the end of the year, up from a range of 0.25% to 0.5% at present.
The US 10-year breakeven rate climbed to 3.08%, its highest level in at least two decades. The 10-year TIPS yield moved into positive territory for the first time since March 2020, further increasing pressure on riskier parts of financial markets.
In Germany the 10-year Bund yield rose 13bps to 0.97%, the highest since July 2015, while the two-year yield increased 23bps to 0.27%, its highest level since September 2013. The 10-year UK Gilt yield closed the week at 1.96%, while the two-year yield hit 1.74%, its highest level since 2008.
The British pound fell to its weakest level since late 2020 amid a draft of bad news including falling high street sales, plunging consumer confidence and rapidly cooling business activity.
The Japanese yen continues to trade near a two-decade low against the US dollar. China’s renminbi also had a poor week, with its worst weekly drop since before the pandemic, as the country’s deteriorating economic outlook and rising returns on US debt undermine the draw of Chinese securities. US bond yields have crept up to China’s level for the first time in 12 years.