Mid-East Tensions Spike, Stocks & Commodities Slide, Inflation Fears Return

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This week's market analysis: On Friday, the three major indexes all fell sharply. The Dow closed down 1.24%, the Nasdaq down 1.62%, and the S&P 500 down 1.46%. For the week:

• Dow Jones: -2.37%, close at 37,983
• Nasdaq: -0.45%, close at 16,175
• S&P 500: -1.56%, close at 5,123
• Leading sectors: None, all sectors fell for the week.
• Worst sector: Financials -3.8%

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Weekly Summary

Economy & Financial Markets

• Wednesday's CPI data came in above expectations, reigniting rate-cut worries. PPI data was below expectations, easing some tension.
  • Headline CPI: +0.4% MoM, +3.5% YoY (vs. 0.3% and 3.4% expected)
  • Core CPI: +0.4% MoM, +3.8% YoY, both above expectations
  • Food: +0.1% MoM; Energy: +1.1% MoM, +2.1% YoY
  • Core goods continued to show disinflation: -0.2% MoM
  • Core services remained sticky: +0.5% MoM
    • Used cars: -1.1% MoM; New cars: -0.2% MoM
  • Services breakdown:
    • Shelter: +0.4% MoM (rent and OER both +0.4%)
    • Transportation services: +1.5% MoM
    • Motor vehicle insurance: +2.6% MoM; Motor vehicle repair: +1.7% MoM
    • Medical care services: +0.6% MoM (hospital services +1.0%)
• 10-year Treasury yield closed at 4.5%
• WTI crude closed at $85.45/bbl; Brent at $90.15/bbl

• FOMC minutes showed most officials supported halving the current pace of balance sheet runoff and doing so as soon as possible.
• US core PCE for end of month estimated at 2.7% YoY, down from 2.8% last month, continuing disinflation trend.
• Gold surged then pulled back, hitting a new all-time high near $2,430 before settling around $2,350.
• Dollar index closed at 106.01.
• Bitcoin fell over 7% after Iran's airstrike, then recovered to around $64,000.
• Buffett issued yen-denominated bonds, possibly to increase holdings in Japanese stocks.
• China March financial data:
  • Aggregate social financing (new) was RMB 4.87 trillion, above the expected RMB 4.11 trillion, but down RMB 0.51 trillion YoY.
  • RMB loans to the real economy: RMB 3.29 trillion, down RMB 656.1 billion YoY, the main drag on social financing.

• Credit-based RMB loans: RMB 3.09 trillion, slightly above the expected RMB 3.03 trillion, down RMB 800 billion YoY.
  • Corporate loans: RMB 2.58 trillion, down RMB 571.5 billion YoY.
  • Household loans: RMB 942.4 billion, with short-term loans up RMB 490.8 billion (down RMB 118.6 billion YoY) and medium/long-term loans up RMB 451.6 billion (down RMB 183.2 billion YoY).
• M2 growth: 8.3% YoY (vs. 8.4% expected). M1 growth: 1.1% YoY.
• Social financing outstanding growth: 8.7% YoY (vs. 8.5% expected). RMB loan outstanding growth: 9.6% YoY.
• On April 12 at 3:00 PM Beijing time, the State Council issued the "Opinions on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market," consisting of 9 parts, known as the new "National Nine Articles" for capital markets. This is the third such guiding document from the State Council, following those in 2004 and 2014.

Key contents include:

1. Overall requirements: Uphold Party leadership, serve national strategy, strengthen regulation, prevent risks, promote high-quality development, build a safe, standardized, transparent, open, vibrant, and resilient capital market.
2. IPO and listing regulation: Improve listing standards, strict review, strengthen full-chain responsibility for IPOs, increase underwriting supervision, regulate market behavior.
3. Listed company regulation: Enhance information disclosure and corporate governance, improve share reduction rules, strengthen cash dividend regulation, increase investment value of listed companies.
4. Delisting regulation: Deepen delisting reform, tighten delisting standards, smooth multiple delisting channels, strengthen delisting supervision.
5. Securities and fund institution regulation: Promote high-quality industry development, strengthen shareholder and business access management, foster good industry culture.
6. Trading regulation: Promote stable market operation, strengthen trading supervision, improve expectation management mechanisms.
7. Medium- and long-term capital entry: Establish a policy system supporting long-term investment, develop equity funds, optimize insurance and pension investment policies.
8. Reform and opening up: Deepen capital market system reform, improve multi-tiered market system, promote high-level opening up.
9. Legal construction and regulatory coordination: Strengthen legal construction, increase cost of violations, strengthen central-local and inter-ministerial coordination.
10. Regulatory team building: Build a high-quality professional regulatory team, resolutely punish corruption, foster a clean political environment.

Geopolitics

• Russia-Ukraine: Russian forces are further advancing in the Chasiv Yar area. European countries are expanding military aid to Ukraine.
• Israel-Palestine: Iran launched airstrikes on Israel in response to the earlier Israeli attack on Iran's embassy in Syria. Iran's permanent mission to the UN said the attack could be considered "concluded," citing Article 51 of the UN Charter on self-defense. It warned that if Israel makes another "mistake," Iran's response would be more severe, and warned the US not to get involved. As of press time, Israel had not specified further response measures.

(Source: REUTERS - Amir Cohen)

(Source: WSJ)

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Key Macro Events for the Coming Week (Eastern Time)

Monday: 8:30 AM NY Empire State Manufacturing Index, Retail Sales; 10:00 AM NAHB Housing Market Index; 8:00 PM Fed's Daly speaks. Tuesday: 8:30 AM Housing Starts, Building Permits; 9:15 AM Industrial Production. Wednesday: 2:00 PM Fed Beige Book; 5:30 PM Fed's Mester speaks. Thursday: 8:30 AM Initial Jobless Claims, Philadelphia Fed Manufacturing Index; 9:15 AM Fed's Williams speaks; 10:00 AM Existing Home Sales, Leading Index; 11:00 AM & 6:45 PM Fed's Bostic speaks. Friday: 10:30 AM Fed's Goolsbee speaks.

(Beijing Time) Monday: (none listed) Tuesday: 10:00 AM Urban Survey Unemployment Rate, Q1 Real Estate Development Investment, Retail Sales, Industrial Production, GDP. Wednesday: (none listed) Thursday: (none listed) Friday: (none listed)

Key focus: Geopolitical developments, China data on Tuesday.

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Risk disclaimer: The views in this article are for reference only and do not represent any investment advice. Market risk exists; invest with caution.

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