Markets remain nervous as sticky inflation data stands in way of rate cuts

Biggest event of the week will be Fed’s next rate decision, which is due on May

With the threat of all-out war in the Middle East receding somewhat, the fear afflicting the market now is slower-than-expected growth, accompanied by sticky inflation and higher-for-longer interest rates.

On April 25, investors dumped stocks after US gross domestic product (GDP) growth came in at a 1.6 per cent annualised pace in the first quarter, falling well short of expectations of 2.5 per cent.

Commerce Department data that the Federal Reserve tracks for inflation also showed prices continuing to climb considerably higher than the 2 per cent annual goal.

But markets recovered sharply on April 26 following strong results by Google's Alphabet and Microsoft, both of which are leading the artificial intelligence (AI) wave.

The Dow Jones Industrials ended a tumultuous week 0.67 per cent higher at 38,239.66 points, while the S&P 500 posted its best week since November to push 2.67 points higher for the week at 5,099.96 points. AI hype saw the tech-heavy Nasdaq surge 4.23 per cent last week to 15,927.90 points.

In Singapore, the Straits Times Index had one of its best weeks in recent memory as it leapfrogged through the key 3,200-3,250 band to spend much of the next four sessions between 3,250 and 3,300, and ending the week up 3.3 per cent at 3,280.1 points.

Taking into account dividend distributions, it posted a total return of 3.7 per cent. This brought the year-to-date total return of the Singapore benchmark to 2.5 per cent.

Stocks in the offshore and marine and energy segments have risen strongly in recent sessions, fuelled by higher oil prices amid the Middle East conflict. Stocks such as Dyna-Mac, Beng Kuang Marine, Marco Polo Marine and Mermaid Marine are now at multi-month and multi-year highs.

Also performing strongly was Jardine C&C, which has risen.