[True Flame Finance] April 17 Market Morning Brief: Powell delivers hawkish remarks; IMF raises global economic outlook for this year

"The International Monetary Fund (IMF) has slightly raised its forecast for global economic growth this year. The IMF's World Economic Outlook report released on Tuesday stated that the global economy will grow by 3.2% this year, 0.1 percentage points higher than the January forecast. The forecast for 2025 remains unchanged at 3.2%."

Overnight Highlights

• Powell hinted that stubborn inflation might delay the Fed's rate cuts. The S&P 500 and Nasdaq closed lower in volatile trading on Tuesday, with the 10-year Treasury yield climbing to a five-month high. The dollar maintained its gains after Powell's speech, with the dollar index hitting a five-month high. The yen fluctuated as markets worried Japanese officials might intervene to curb its decline. Gold futures rose for the fourth consecutive day. Oil prices moved narrowly as risk aversion dominated, with traders focusing on Israel's response to Iran's attack. $Hang Seng Index(00HSI.HK)

International News

• The IMF slightly raised its forecast for global economic growth this year. The IMF's World Economic Outlook report released on Tuesday stated that the global economy will grow by 3.2% this year, 0.1 percentage points higher than the January forecast. The forecast for 2025 remains unchanged at 3.2%.

• The IMF also unusually criticized the U.S., stating that part of the reason for the U.S. economic strength is the "disconnect between its budget policy and long-term fiscal sustainability." The IMF warned that this approach poses short-term inflation risks and could create long-term fiscal and financial imbalances for the global economy by increasing costs for other economies.

• U.S. industrial production rose for the second consecutive month in March, driven by higher-than-expected manufacturing output, highlighting further stabilization in the sector. Data released by the Fed on Tuesday showed industrial production, including manufacturing, mining, and utilities, grew by 0.4%, matching the revised growth from the previous month.

• U.S. housing starts slowed in March as flat rates gave way to moderated demand and builder caution. Government data on Tuesday showed housing starts fell 14.7% to an annualized rate of 1.32 million units, the lowest since August and below expectations.

• Fed Chair Powell stated that recent inflation data suggests the central bank may need more time to gain enough confidence to cut rates. Powell noted that after rapid disinflation late last year, the Fed has seen little further progress and is prepared to keep rates high "as long as necessary" if price pressures persist.

• Fed Vice Chair Philip Jefferson said inflation is expected to continue slowing with rates at current levels, but rates may need to stay high if inflationary pressures persist.

• U.S. Treasury Secretary Janet Yellen said stronger-than-expected U.S. growth is providing momentum for the global economy, and Washington is working to mitigate remaining risks to the global outlook while ensuring sustainable long-term growth. Yellen added that the U.S. labor market is very healthy, inflation has fallen significantly from its peak, but more work remains.

• ECB President Christine Lagarde said the ECB is nearing a rate cut as long as shocks don’t derail the eurozone's disinflation trend. ECB Governing Council member Francois Villeroy de Galhau stated that after an initial June cut, further rate reductions will be needed in 2024 and 2025.

• Bank of England Governor Andrew Bailey said inflation dynamics are diverging between the U.S. and U.K., hinting that the U.K. might cut rates before the U.S.

• Goldman Sachs expects oil prices to stay at the upper end of its forecast range, citing disappointing U.S. supply and persistently high geopolitical risk premiums.

Greater China News

• The IMF expects China to grow by 4.6% and 4.1% in 2024 and 2025, respectively, unchanged from its January forecast. A weak property sector and domestic demand will weigh on economic activity, with the IMF warning that China's export surplus could trigger trade tensions with other countries.

• UBS raised its 2024 China growth forecast from 4.6% to 4.9%, citing better-than-expected Q1 performance and brighter export prospects. UBS now expects China's 2024 exports to grow by 3.5%, up from its prior 1.2% forecast. Given changes in Fed rate-cut expectations, UBS no longer expects the People's Bank of China to cut its MLF policy rate this year.

• The U.S.-China economic working group met in Washington on Tuesday, with the U.S. reiterating concerns about the world's second-largest economy's industrial overcapacity, while China rebutted the accusation. Earlier, Chinese President Xi Jinping told German Chancellor Olaf Scholz that China's surge in clean-tech exports helps the world combat inflation, countering U.S. and European pressure to curb overcapacity.

• China's National Financial Regulatory Administration, alongside the Ministry of Industry and Information Technology and the National Development and Reform Commission, issued a notice on deepening financial services for manufacturing to support industrial upgrading, pledging greater financial support for the sector and supply chain stability.

• Bloomberg: $COUNTRY GARDEN(02007.HK) reportedly plans to seek another extension for three previously restructured onshore bonds. Sources said Country Garden aims to defer interest and partial principal payments for "21 Bidi 01" from March 2023 to March 2024 to September. The bond missed its March interest payment under the original restructuring plan and is now in a 30-day grace period.

• $BYD COMPANY(01211.HK) expanded its luxury SUV and off-road vehicle lineup with two new models targeting rivals like Jaguar Land Rover. On Tuesday evening, China's largest automaker unveiled the "Super 3" and "Bao 8" at its Shenzhen headquarters but did not disclose whether the new SUVs are hybrid or pure electric.

• Intel (INTC.US) will release two downgraded AI chips for the Chinese market to comply with U.S. export controls. According to a whitepaper dated April 12, the HL-328 and HL-388 chips are set for release in June and September, respectively.

Commodities & Forex

• Despite calls from U.S. and European officials for Israel to avoid escalation, senior Israeli military officials said they have no choice but to respond to Iran's weekend attack. The Middle East accounts for about a third of global oil supply. A BOK Financial senior VP noted that unless attacks escalate or damage oil facilities, each incident's price impact will diminish, though a $7–10 geopolitical risk premium will likely persist until tensions ease.

• Citi raised its 2025 gold forecast by 40% to $2,875/oz, after Goldman Sachs last Friday called gold in an "unshakeable bull market" and lifted its year-end target to $2,700.

Earnings & Data Watch

• Eurozone March CPI YoY (Final) (Est.: 2.40%, Prev.: 2.40%)

• Eurozone March CPI MoM (Est.: 0.80%, Prev.: 0.80%)

• U.S. EIA Crude Stocks (Apr 12) (Est.: +0.4M, Prev.: +5.841M)

Source: Goldhorse Capital Extramile

Author: Terry Chow