Optimism over corporate earnings is fueling stock indices. The Hong Kong index reached a 5-month high :: InvestMacro

By JustMarkets

On Monday, the Dow Jones (US30) rose by 0.38%, while the S&P 500 (US500) Index gained 0.32%. The NASDAQ Technology Index (US100) closed positive 0.35%. Meanwhile, the S&P 500 (US500) and NASDAQ (US100) 100 indices hit 2-week highs. Optimism over first-quarter earnings, positive corporate news, and lower bond yields contribute to the broader market’s gains.

Tesla’s (TSLA) shares are up more than 12% after the company met vital security and data privacy requirements in China. It will partner with Baidu (BIDU) to introduce a fully autonomous driving feature. Domino’s Pizza (DPZ) is up more than 4% after reporting better-than-expected revenue from operations in the first quarter. Apple (AAPL) shares are up more than 3% after Bernstein upgraded its rating to “outperform.”

First-quarter earnings results were mostly better than expected, which is favorable for the stock. According to Bloomberg Intelligence, about 81% of the S&P 500 companies already reported beat first-quarter earnings estimates.

In the coming days, markets will focus on the outcome of Tuesday/Wednesday’s FOMC meeting and Fed Chair Powell’s comments on how long the Federal Reserve is willing to wait before cutting interest rates. Recent US price data has signaled solid core inflation, pushing back rate cut expectations. Currently, markets are pricing in a 25 bps chance of a rate cut of 2% at the next FOMC meeting on May 1 and 13% at the next meeting on June 12. In addition, the earnings results of AMZN and AAPL on Thursday will also determine the market’s direction.

Equity markets in Europe were mostly down on Monday. Germany’s DAX (DE40) was down 0.24%, France’s CAC 40 (FR40) closed negative 0.29%, Spain’s IBEX 35 (ES35) decreased by 0.48%, and the UK’s FTSE 100 (UK100) closed positive 0.09%.

Hawkish comments from ECB Governing Council representatives Knot and Wunsch on Monday put moderate pressure on European indices when they said the ECB should be cautious, sending a signal to markets that it will cut rates for a second consecutive month in July. The Eurozone economic confidence indicator for April unexpectedly fell by 0.6 to 95.6, weaker than expectations of a rise to 96.7. Germany’s consumer price index (EU harmonized) for April rose by 2.4% y/y, stronger than expectations of 2.3% y/y.

WTI crude oil prices fell to $82.5/bbl on Tuesday, extending losses from the previous session as peace talks between Israel and Hamas eased fears of a widening conflict in the Middle East. Markets are awaiting the Hamas leadership’s response to a phased truce offer made by Israel over the weekend in Cairo. However, ongoing Houthi attacks on maritime traffic south of the Suez Canal keep investors on edge.

Asian markets were predominantly up yesterday. Japan’s Nikkei 225 (JP225) rose by 0.81%, China’s FTSE China A50 (CHA50) added 0.64%, Hong Kong’s Hang Seng (HK50) gained 0.54%, and Australia’s ASX 200 (AU200) was positive 0.81%. The Hang Seng (HK50) retreated from the 5-month peak the previous day as some traders sought to lock in profits after substantial gains in the last six sessions. Meanwhile, investors were digesting China’s manufacturing PMI data for April, where official data showed a second consecutive month of growth in factory activity. Private Caixin survey data indicated the manufacturing sector grew the most in 14 months.

On Monday, the yen fell to 160 per dollar for the first time since 1990 before making a more than 3% jump to 154.5 per dollar due to a supposed intervention by Japanese authorities. Meanwhile, the government has not confirmed whether it has intervened in the markets to support the yen, although chief currency diplomat Masato Kanda said they would release the results at the end of next month. Japan’s March 2024 retail sales rose 1.2% year-on-year, slowing significantly from the upwardly revised 4.7% rise in February and well below market expectations for a 2.5% rise. Nevertheless, it was the 25th consecutive month of retail sales growth as consumption in Japan continued to rise.

Flash data showed that retail sales in Australia fell by 0.4% in March 2024, falling short of the 0.2% growth projection, which was also revised down from February. It was the first decline in retail sales since December last year, as turnover fell across all sectors.

S&P 500 (US500) 5,116.17 +16.21 (+0.32%)

Dow Jones (US30) 38,386.09 +146.43 (+0.38%)

DAX (DE40) 18,118.32 −42.69 (−0.24%)

FTSE 100 (UK100) 8,147.03 +7.20 (+0.09%)

USD Index 105.64 −0.32 (−0.30%)

Important events today:

• – Japan Unemployment Rate (m/m) at 02:30 (GMT+3);
• – Japan Industrial Production (m/m) at 02:50 (GMT+3);
• – Australia Retail Sales (m/m) at 04:30 (GMT+3);
• – China Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – China Non-Manufacturing PMI (m/m) at 04:30 (GMT+3);
• – China Caixin Manufacturing PMI (m/m) at 04:45 (GMT+3);
• – German Retail Sales (m/m) at 09:00 (GMT+3);
• – Switzerland KOF Leading Indicators (m/m) at 10:30 (GMT+3);
• – German Unemployment Rate (m/m) at 10:55 (GMT+3);
• – German GDP (m/m) at 11:00 (GMT+3);
• – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
• – Eurozone GDP (q/q) at 12:00 (GMT+3);
• – Canada GDP (m/m) at 15:30 (GMT+3);
• – US Chicago PMI (m/m) at 16:45 (GMT+3);
• – US CB Consumer Confidence (m/m) at 17:00 (GMT+3).

By JustMarkets

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.