Friday Roundup: Markets tumble after “reality shock” with inflation; What to watch for

May 6, 2022 By: WealthMintr Team


The markets, which yesterday had what was a reality shock for many, followed their course of losses in the early morning trades, although much more moderate, in the case of the United States. Both US and European index futures are in the red. US 10-year Treasuries rose above 3%.

Yesterday, just one day after posting a two-year high, the S&P 500 sank, with more than 95% of its companies down. Moments ago, the futures contract linked to the indicator lost 0.5%. The Nasdaq futures, which a moment ago fell 0.7%, saw its benchmark index yesterday suffer one of the sharpest turns in its history – it plummeted almost 5%.

The Federal Reserve’s (Fed) action plan to tame the soaring prices with the increase in the cost of money, which had initially reassured the markets by ruling out the possibility of more pronounced interest rate increases, raises doubts in the market again. The question in evidence is whether the US central bank will be able to curb the inflationary impulse without driving the world’s largest economy into recession.


Today, the main highlight will likely be the US jobs report for April, which together with the consumer price index (CPI) reading next Wednesday, will help shape the debate in the six weeks leading up to the next meeting of the FOMC/Fed in mid-June. Deutsche Bank economists estimate that the payroll of nonfarm workers will increase by 465,000, which in turn would reduce the unemployment rate to 3.5%. Analysts consulted by Bloomberg say that Payroll will increase by 380,000 in April.

Solid payroll data represents a lasting source of inflationary pressures – and gives the Fed the backbone to apply sharper rate hikes if it deems it necessary.

This morning, the market saw some disappointing data on German production, down 3.4% in March, against a 3% increase in February.


The increase in long-term sovereign bond premiums is closely monitored by the markets, as it affects the cost of borrowing. US mortgage interest rates have risen again, reaching the highest level since August 2009.

Also sounding the alarm was the worsening of the productivity indicator of the non-agricultural sector, which suffered the biggest drop since 1947 (down at an annual rate of 7.5% over the previous three months). Labor costs rose 11.6% in the first quarter. With these data in hand, accompanied by the 1.4% decline in US GDP a few days ago, they did not bring good vibes to the markets.


Central banks across the globe have tightened their belts to preserve the purchasing power of their citizens. Yesterday, the Bank of England (BoE) issued a warning signal that clashes with the optimism conveyed by Fed Chairman Jerome Powell. He was startled by his warnings of inflation exceeding 10% in the country and recognized the risk of contraction of its economy. The institution applied its fourth consecutive rate increase, by 0.25 percentage point, to 1%, the highest level in 13 years.


E-commerce company stocks – from Etsy Inc. to Shopify Inc. – retreated after reporting weaker-than-expected quarterly earnings. Less optimistic forecasts have deepened concern that the pace of online shopping has slowed. EBay Inc. gave a lackluster sales and earnings outlook for the current quarter, accelerating its decline from peaks reached during the pandemic.

Elon Musk has secured about $7.1 billion of new financial commitments, including from billionaire Larry Ellison, a Saudi prince, and Sequoia Capital, to help fund his proposed $44 billion acquisition of Twitter Inc.


DOW JONES (-3,12%), S&P 500 (-3,56%), NASDAQ COMPOSITE (-4,99%), STOXX 600 (-0,70%), IBOVESPA (-2,81%)

The optimism in the stock markets did not last more than a day. Analysts questioned the Fed’s ability to rein in the highest inflation in decades without pushing the US economy into recession. Amid these fears, the S&P 500 recorded its second biggest decline of the year. Both the Dow Jones and Nasdaq have suffered the sharpest declines since 2020. Additionally, a massive sell-off of long-term Treasuries has pushed 10-year bond premiums above 3%.



  • US: Non-Farm Employment (Payroll) Report (Apr); Unemployment Rate/Apr; Average Earnings per Hour Worked/Apr; Labor Force Participation Rate/Apr; Consumer Credit/Sea
  • Europe: Germany (Industrial Production/Sea); France (Private Sector Payroll/1Q22); United Kingdom (Halifax Property Price Index/Apr; Construction PMI/Apr); Spain (Industrial Production/Sea); Italy (Retail/Sea Sales)
  • Latin America: Brazil (IGP-DI/Apr; Vehicle Production and Sales/Apr); Mexico (Gross Fixed Investment/Feb)
  • Asia: Japan (Base currency); Hong Kong (International Bookings/Apr)
  •  Central Banks: Statements by John Williams and Raphael Bostic (Fed); Catherine Mann, Huw Pill and Silvana Tenreyo (BoE); Francois Villeroy (ECB); Joachim Nagel (President of the Bundesbank)
  • Balance sheets: Intesa Sanpaolo, adidas, ING, Cigna, Alibaba, Sabesp, Porto Seguro, Enel Generación Chile


  • USA: Employment Trend Index/Apr; Wholesale/Sea Sales; Optimism among Small Businesses NFIB/Abr; Redbook index
  • Europe: Eurozone (Investor Confidence Sentix/Mai; (Economic Perception ZEW/Mai)); Germany (ZEW/May Economic Perception); France (Trade/Sea Balance; Current Transactions); United Kingdom (BRC/Apr Retail Sales)
  • Latin America: Brazil (Focus Bulletin; Retail/Sea Sales); Mexico (IPC/Apr)
  • Asia: Japan (Sunday: Service Sector PMI/Apr; General Wage of Employees/Mar; International Bookings/Apr. Monday: Domestic Expenses/Mar); China (Trade Balance/Apr; CPI and IPP/Apr), Hong Kong public holiday
  • Central Banks: On Sunday: Speech by Raphael Bostic of the Fed and minutes of the Bank of Japan (BoJ) Monetary Policy Meeting
  • Balance sheets: Duke Energy, Microchip, BioNTech, Westpac Banking, Infineon, Exelon, Tyson Foods, Itaú Unibanco, Tran Gas del Sur, BTG Pactual, Cemargos, Cementos Argos, Naturgy, Assaí, Metalúrgica Gerdau