Archives of “April 2019” month

rss

S&P 500 seals five-day win streak as trade talks fuel global rally

  
Analysis, US Market

The S&P 500 advanced 0.2 per cent to close at its highest level since October 9, helped by a strong lead-in from European equities. The Wall Street benchmark had gained as much as 0.6 per cent during the session but trimmed those gains — briefly turning negative in the final hour of trading — as disappointing data on the US services sector damped sentiment.

The rally was particularly kind to chipmakers. Advanced Micro Devices led the way with an 8.5 per cent gain, while the Philadelphia Semiconductor Index hit a record high, amid hopes a trade truce with China would buoy chip demand.

In Europe, the continent-wide Stoxx 600 added 1 per cent and reached its highest level since late August. Frankfurt’s Xetra Dax 30 gained 1.7 per cent. London’s FTSE 100 was up by a more mild 0.4 per cent.

The yield on 10-year US Treasuries crossed back up over 2.5 per cent as the improving sentiment toward growth drew investors out of the debt. It rose 4.1 basis points to 2.5205 per cent.

Brent crude neared $70 a barrel earlier in the session and towards a new high for 2019 on signs of falls in Opec production and growing confidence in the outlook for global growth. But in US trade it gave up some ground, settling 0.1 per cent lower at $69.31 a barrel.

Mainland China’s CSI 300 added 1.2 per cent, a one-year high. The gains for Chinese equities also come as a survey of China’s service sector found activity rose to a 14-month high in March, echoing improvements in the manufacturing sector.

Larry Kudlow, the director of the White House National Economic Council, said he expected “additional headway” would be made in talks that resumed in Washington on Wednesday

The US and Europe are in a race to be the most-disappointing economy

  
Analysis, Economy

Canada, meanwhile continues to defy estimates

The economic surprise index from Citigroup is one of my favourite indicators. It measures how well various economies have done in relation to what economists were expecting.
The story so far this year is that Canada has vastly outperformed forecasts. A big part of that is a rebound in oil prices but it also reflects what was an overly-bearish view of economists.
On the flipside, Europe has been a major disappointment even by the low bar that was set by economists. That shouldn’t surprise anyone but I didn’t expect to see the USA at the bottom of the list. It’s done better than Europe but the overall tenor of the numbers has been weak, including today’s ISM non-manufacturing data.
The big question now is whether economists got their forecasts completely wrong, or if they just got the timing wrong.
Citi economic surprise index

European shares end with solid gains. German Dax leads the way

  
Analysis, Global Indices

German Dax up 1.73%

The major European shares are ending the day with sharp gains, led by the German Dax. Helping the sentiment is better European nonmanufacturing data, hopes for a Brexit compromise and progress on US/China. Is the bottom in?  That is a big “if” but investors are jumping in.
The provisional closes are showing:
  • German DAX, +1.73%. It is also running from the 200 day MA
  • France’s CAC,+0.81%
  • UK’s FTSE, +0.34%
  • Spain’s Ibex, +1.28%
  • Italy’s FTSE MIB, +1.08%
  • Portugal’s PSI 20, +0.97%
In the benchmark 10 Year Note sector, yields a higher and the German tenure has moved back above the 0.0% level (just barely, but it is above).
German Dax up 1.73%

ISM non-manufacturing index 56.1 vs 58.0 expected

  
Analysis, Economy

ISM non-manufacturing report

ISM non-manufacturing report
  • Prior was 59.7
  • Lowest since August 2017
  • Prices paid 58.7 vs 54.4
  • New orders 59.0 vs 65.2 prior
  • Employment 55.9 vs 55.2 prior
  • Business activity 57.4 vs 64.7
  • New export orders 52.5 vs 55.0 prior
  • IMports 51.5 vs 48.5 prior
  • Full report
That new orders drop is concerning. The index is still at a very healthy level but the drop is a concern.
Comments in the report:
  • “Labor is tight and in short supply.” (Accommodation & Food Services)
  • “While we have a slowed down in residential service and install [area], we are still experiencing strength in the new commercial construction area.” (Construction)
  • “Q1 revenue in total on plan or slightly above. Some products slightly below plan. Overall, good start to 2019.” (Finance & Insurance)
  • “Supply expenses are up commensurately with business conditions as business activity has outpaced the budget on average four to six percent for our fiscal cycle that [began] 7/1/18.” (Health Care & Social Assistance)
  • “There is a sense of relief in our industry with the temporary reprieve of the additional tariffs. As of now, we feel this will help us maintain competitive prices and steady margins over the next quarter.” (Management of Companies & Support Services)
  • “Activity level held flat.” (Mining)
  • “Initial surge in business at the beginning of the year has peaked and settled to a more stable level.” (Professional, Scientific & Technical Services)
  • “Locally as construction grows, a shortage of available workers for the industry is occurring for future projects.” (Public Administration)
  • “April is when our real busy season begins and it has arrived early this year, demand is quite strong.” (Real Estate, Rental & Leasing)
  • “Labor, weather and regulatory issues have impacted operations.” (Transportation & Warehousing)

Eurozone February retail sales +0.4 vs +0.3% m/m expected

  
Analysis, Economy

Latest data released by Eurostat – 3 April 2019

  • Prior +1.3%; revised to +0.9%
  • Retail sales +2.8% vs +2.3% y/y expected
  • Prior +2.2%
A beat on the headlines but the shine on that is taken off by the negative revision to January’s report. Nonetheless, the release here provides a general gauge of consumption activity in the region and the data beat here will at least provide some minor relief – if anything else – that Q1 economic activity isn’t all bad.
EUR/USD sits higher still at 1.1242 currently while EUR/JPY is also near the highs for the day at 125.40 as the dollar and yen remains weak on more upbeat risk tones.

UK March services PMI 48.9 vs 50.9 expected

  
Analysis, Economy

Latest data released by Markit/CIPS – 3 April 2019

  • Prior 51.3
  • Composite PMI 50.0 vs 51.1 expected
  • Prior 51.5
That’s a notable miss on the services sector reading and drags the composite reading to basically flat levels for March. Markit notes that this points to UK GDP stagnating in Q1 with economic activity even contracting in March.
For some context, that’s the lowest print in services since July 2016; similar for the composite print as well. But once again, it highlights the sort of drag that Brexit uncertainty is having on the UK economy.
Cable dips a little on the data, falling to 1.3150 levels from around 1.3170 earlier but still remains relatively buoyant on Brexit developments.
Go to top