Daily Market Color

Rates Little Changed as Equities Wrap Up Worst Week in 6 Months

Equities end worst week since March 2022 amid “higher for longer” narrative. The possibility of entrenched inflation and additional Fed policy tightening drove long-end yields to multi-year highs this week, with the 10-year up ~6bps vs. Monday’s close, at ~4.26%. The 2-year closed ~2bps lower on the week, at ~4.94%. Meanwhile, risk assets declined across the board. Globally, stocks had the worst week since the banking crisis earlier this year, Bitcoin was down 8% and oil logged its first weekly loss since June.

China 2023 growth outlooks worsen. Nomura lowered their 2023 Chinese economic growth forecast from 5.1% to 4.6%, citing weak July economic data and the current debt troubles facing the country’s property sector. Nomura economists noted that growth will face more headwinds as pent-up travel demand declines. Earlier this week, Morgan Stanley and JPMorgan cut their forecasts to 4.7% and 4.8%, respectively. China is the world’s second largest economy, so an economic slowdown there could have global deflationary ripple-effects. China is also the world’s largest consumer of oil, so economic developments there have a measurable impact on energy prices, a key driver of U.S. inflation.

Next week’s action. Look out for home sales data on Tuesday, manufacturing PMI on Wednesday, Durable Goods Orders on Thursday, and Michigan Sentiment on Friday as the week’s headliners. Various Fed Speakers will take the floor throughout the week, but the main event will be Chair Powell’s remarks at Jackson Hole on Friday morning.

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