Markets began the second quarter on Friday on a sour note, with sentiment undermined both by a weak Tankan survey in Japan and, rather perversely, by another robust Employment Report and a buoyant ISM manufacturing survey in the US. With core inflation already picking up, we continue to expect the Fed to resume its interest rate hikes in June, putting renewed upward pressure on the dollar. Rebounds in China’s manufacturing PMIs failed to lift the mood. Oil prices were also hit hard by comments from Deputy Crown Prince Mohammed bin Salman, which were widely interpreted to mean that Saudi Arabia would only freeze output if Iran agreed to do the same.
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