DOW JONES, NIKKEI 225, ASX 200 WEEKLY OUTLOOK:
- Dow Jones, S&P 500 and Nasdaq 100 closed +0.89%, +0.77%, and +0.51% respectively
- US earnings season is kicking off this week, with JP Morgan, Goldman Sachs, Wells Fargo and Bank of America among the pioneers to announce Q1 results
- The Nikkei 225 and ASX 200 index traded mildly higher; yields climbed on strong PPI readings
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Earnings, Inflation, Yields, Asia-Pacific Week-Ahead:
Wall Street equities extended higher on Friday, with the Dow Jones and the S&P 500 both hitting fresh records. Strong macro data and stimulus-led reflation hopes alongside the Fed’s accommodative stance boosted investor confidence. A slew of bank earnings this week are expected to provide clues about the pace of economic recovery.
Based on data from Factset, the estimated Q1 earnings growth rate for the S&P 500 is 24.5% YoY, which will mark the highest since Q3 2018. More companies have issued positive EPS guidance than those that have issued a negative outlook, suggesting that corporates are more optimistic about their business with rapid rollout of vaccines and eased lockdown measures. Industrial analysts foresee a 10% price increase in the S&P 500 index over the next 12 months based on bottom-up analysis.
Inflation remains a key market focus, with higher-than-expected Chinese and US PPI readings leading Treasury yields higher on Friday. China’s March PPI rate jumped 4.4% YoY, compared to a 3.5% forecast. Rising price levels of goods at factory doors may bring up consumer price levels in the months to come, which may solidify the PBoC’s neutral monetary policy stance. US March PPI climbed 1.0% MoM, beating the forecast by half of a percent and hinting at a faster-than-expected rise in output prices.
US Q1 Earnings Highlights
Source: Bloomberg, DailyFX
Asia-Pacific markets look set to kick off the week in a positive mood, with futures across Japan, Australia, Hong Kong, Taiwan, Singapore, Malaysia, India and Thailand pointing to a higher start following a record close on Wall Street. The VIX volatility index fell to its lowest level seen since February 2020, suggesting that markets are probably in a complacent mood again.
The MSCI emerging market index has underperformed the MSCI developed market index since Greater China equities entered a consolidative phase in mid-February. Chinese authorities fined AlibabaGroup $2.8 billion in a monopoly probe, which may signal a further tightening up in regulatory control on the technology giants. This move may dampen sentiment across Greater China markets, leading to further divergence between the performance of EM and DM markets.
Looking ahead, Tuesday’s US core inflation and Thursday’s US retail sales data are among the top event risks this week. China will report its Q1 GDP growth rate on Friday, which is expected to hit 18.8% YoY partly due to a low base in the previous year. Meanwhile, oil traders will eye Wednesday’s API crude inventory data for clues about the supply and demand relationship. The RBNZ will announce its policy interest rate decision on Wednesday too. Find out more from theDailyFX calendar.
Looking back to Friday’s close, 6 out of 9 Dow Jones sectors ended higher, with 73.3% of the index’s constituents closing in the green. Healthcare (+1.48%), information technology (+1.47%) and consumer discretionary (+1.15%) were among the best performers, while consumer staples (-0.36%) and energy (-0.10%) lagged behind.
Dow Jones Sector Performance 09-04-2021
Source: Bloomberg, DailyFX
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