Week In Review: Inflation Angst, Volatile Markets, US Retail Sales Stall

Risk assets resumed their rise on Monday morning despite the shockingly disappointing nonfarm payrolls report last Friday. Market optimism over the reopening of economies and expectations of lower rates for longer supported Asian equities. However, European and US stocks fell as inflation angst sparked a tech selloff.

In the currency space, the British Pound caught our attention after surging above the 1.41 level. The combination of easing political risk for the United Kingdom and a broadly weaker dollar sent the GBPUSD skyrocketing over 150 pips on Monday. The key question was whether the Pound could hold on to recent gains? Looking at the technical, prices remain bullish on the daily charts with a weekly close above 1.4100 potentially opening the doors towards 1.4200.

On Tuesday morning, we discussed why tech stocks were falling so hard. In the afternoon we covered the technical outlook for gold. The precious metal concluded the week gaining 0.67% with prices trading marginally above $1840.

Our stock of the week was Disney which reported its fiscal second-quarter results after U.S. markets closed on Thursday 13th May. Disney announced earnings of 79 cents on revenue of $15.61 billion. Although earnings beat forecasts, revenues fell short of expectations. In regards to its streaming service, the number of paid subscribers for Disney+ hit 103.6 million which was less than the 110.3 million projected in the Bloomberg Consensus. Share of the entertainment giant shed 6% this week.

Mid-week, it was all about the US inflation report which certainly did not disappoint. US inflation surprised to the upside as headline and core both jumped more than expected in April. Consumer prices jumped 4.2% – the biggest headline number since 2008.

The US inflation report roiled equity markets on Wednesday with the Vix punching above 28.00 for the first time since early March. We saw the Dow Jones registering its largest single-day loss since January while the Nasdaq and S&P 500 tumbled like a house of cards.

On Thursday, it was a sea of red across the global equity space as the inflation fears rattled markets. Interestingly, US stocks gained ground in the evening – breaking a three-day losing streak. Despite extending gains on Friday, the S&P 500, Dow Jones and Nasdaq ended the week in losses.

All eyes were on the US retail sales report on Friday which unexpectedly stalled in April. On the bright side, March’s number was revised upwards to 10.7% from the previously reported 9.8% increase.

Taking a look at the Dollar Index, it remains under pressure on the daily charts. Sustained weakness below 90.45 could signal a move towards 90.00 and possibly lower this month.

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