12-04-2021

Markets weaker overnight in Far East despite jump in Alibaba which rallied 5% following the $2.8Bln fine from Chinese regulators re anti competitive practices. Clearly the consensus for a greater fine and this now puts the inquiry to bed.

US markets may be given a further boost today following the airing of an interview with Jay Powell, the chairman of the Federal Reserve. Powell described the US economy as being at an inflection point, with growth and new jobs about to accelerate. However he warned that new hot spots of covid infection could impede the recovery which underlined the importance of the vaccine roll out.

The hope is that the vaccination program will break the link between infections and hospitalisations whilst slowing the spread of the disease as evidence emerges that what is happening here in the UK.

Review

• FTSE +178 +2.65%
• DOW +647 +1.95%
• S&P +109 +2.71% N
• ASDQ +420 +3.11%
• DAX +127 +0.84%
• NIKKEI -86 -0.3%

Equity markets had another positive week, hitting record highs in US indices and the pan European Stoxx index.

Investors remain positive about the medium term outlook, looking past the end of the pandemic.

Friday was tougher for US markets as bond yields started to rise again

following the announcement of the regular upcoming auction of bonds.

Another concern for US markets is complacency and the overall level of optimism – any shift here could cause a set back in equities. Maybe Biden’s tax plans might be one of the possible causes.

UK markets had a strong week as the FTSE100 hit its highs for the year. Cyclical stocks and the fall in Sterling helped push the index higher.

Followers of UK plc will know the FTSE250, a better barometer of the health of the UK economy, has been nudging all time highs for the past week – rallying 3.5% last week - breaking the all time high from late December 2019.

EURUSD +1.37 +1.16% GBPUSD -1.16 -0.84% USDJPY -1.03 -0.93%

The US Dollar had showed signs of a turn down just before Easter. This move accelerated last week as traders reacted to the soothing words of the Federal Reserve following release of minutes from previous meeting.

Yields on US treasuries had backed down also in response but the mood altered Friday with a rise in yields again….Hence the bounce on Friday in the USD.

Gold +9 +0.52% UK OIL -1.61 -2.5% US OIL -1.89 -3.08%

Gold has had a good run, helped in part by the fall in the US Dollar over the past week or so. But like the US Dollar, Gold is showing signs of a pullback. Although it is worth noting that Gold did manage a higher high last week so the technical don’t look too bad.

It all depends on the US Dollar in the medium term.

Oil is becalmed for now following the reassessment of demand in the medium-term which caused the sell-off Mid-March.

Data / events

A busier week for data and events in this full week following the Easter break.

US banks will be in the spotlight with reports from JPMorgan Chase, Bank of America, Citigroup; Wells Fargo; Goldman Sachs.

Banks have been feasting on ideal conditions for investment banking deals. Expectations will be high so the outcome depends on how well these banks can match / beat forecasts.

For the UK, more normal life resumes today with further easing of the lockdown measures as non-essential shops and other businesses open.

Oh and pubs can serve drinks outside. To highlight the desperation that clearly many of us have been feeling, a pub in Sheffield opened its garden last night and was packed (with no spare tables). Midnight in Sheffield at below zero degrees temperature – what’s there not to like?

Boris Johnson reminds us all to be responsible – I wonder how many will listen to that advice?

Monday

US                               Jay Powell speaking about the economy on 60 Minutes program. Can effect markets – with sensitivity towards bond yields and tax rise implications.

US                               Not something we would ever highlight but results of 10- year bond auction announced. Further stress on yields?

Tuesday

US                               CPI - Consumer Price Index. Still remaining in check. Any uptick will likely be seized up by bond traders and then equity traders!

Another bounce as US consumers enjoy the $1,400 windfall via the fiscal aid package provided by the Biden administration.

Wednesday

NZ                               RBNZ monthly policy meeting. No change from the NZ central. Bank likely follow on from last month’s comments that global and domestic economic conditions were not changing enough to warrant a change in monetary policy.

Eurozone                  ECB President Lagarde due to speak at Reuters hosted event. Not sure of topic but Lagarde tends to tread a careful line with comments relating to economic policy.

US                               Not be outdone, Powell is speaking again. This time at the Economic Club of Washington. Again any comments on monetary policy will tend to be seized upon.

Thursday

US                               Retail sales. 4.7% expected – a huge jump as US consumers enjoy the $1,400 windfall via the fiscal aid package provided by the Biden administration.

US                               Philly Fed Manufacturing Index. A pull back from March’s

strong reading.

Friday

US                               Prelim UoM Consumer Sentiment reading. Climbing back to pre-pandemic days.