Prior Week Summary
A strong first-quarter GDP reading and solid corporate earnings releases led U.S. equity markets higher last week with the S&P 500 and Nasdaq reaching record highs. The U.S. economy grew at a 3.2% annualized pace in the first quarter, far surpassing the 2.3% consensus estimate as stockpiled inventory drawdowns drove the headline figure higher. Most analysts expect this temporary impact on the figures to be shortlived, and potentially weigh on second-quarter GDP.
After Prime Minister Theresa May looked set to bring her Brexit proposal to vote for a fourth time next week, reports on Thursday indicated that May is now unlikely to bring the proposal to another vote. This increases the likelihood that the U.K. will participate in the European Parliament elections on May 23rd, an event May has long tried to avoid. Cross-party talks between May’s government and the Labour Party are expected to continue next week as the two sides work to reach an agreement. Elsewhere in Europe, global growth fears were reignited as both a German business sentiment measure and a French manufacturing confidence measure declined.
The Look Forward
In a busy week for economic releases, market participants will get updated figures on consumer spending, factory orders, construction spending and the April jobs report among others. The FOMC holds their two-day policy meeting with rates widely expected to remain unchanged. U.S. and Chinese officials meet in Beijing to continue trade negotiations.
Market Implied Policy Path (Overnight Indexed Swap Rates)
Fixed Income Snapshot
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