It's Going to Be A Massive Week for the Stock Market

Thomas

Economic

Central Bank

Stocks

Summary:

It's going to be a massive week for the stock market as investors prepare for a deluge of economic data and corporate earnings results.

Raymond James' chief investment officer Larry Adam highlighted the top five things to watch this week that could have a big impact on stock market prices.

From corporate earnings to the April jobs report, here's what to keep an eye over the next five days, according to Adam.

1. "Powell's press conference could bring fireworks."

Federal Reserve Chairman Jerome Powell is set to give a speech at 2:30 pm on Wednesday as part of the Fed's May FOMC meeting.

While the Fed is largely expected to keep interest rates unchanged, Powell could offer clues as to whether he is hawkish or dovish on future interest rate cuts. A back-to-back-to-back string of hotter-than-expected inflation reports has kept the Fed on its toes regarding potential interest rate cuts, and investors are starting to get antsy.

"Powell will likely stick to his 'data dependence' script, reiterating that rates are likely at their peak, but may need to remain restrictive for a little longer. However, Powell will need to navigate questions regarding this week's slower growth/hotter inflation flagged in the GDP report and whether the three rate cuts penciled into the March dot plot are still relevant," Adam said.

Powell could also offer more details around the Fed's balance sheet reduction plans, which could have an impact on stock prices.

2. "All eyes on the quarterly refunding announcement."

The Treasury Department is set to announce its borrowing requirements for the upcoming quarter on Monday, as well as detail the composition of issuance between Treasury bills and coupons.

A surge in tax receipts this year has left the Treasury's operating account "flush with cash" at $955 billion. That suggests less need for the Treasury to issue a deluge in new bonds this quarter, which the market would welcome.

"The good news: investor appetite for Treasurys has remained healthy. The bad news: net Treasury supply to fund the ongoing ~$2T deficits leaves plenty for the market to absorb," Adam explained.

3. "Will earnings growth deliver to keep the rally going?"

This is one of the busiest weeks of earnings releases, with just over 170 S&P 500 companies set to report their first-quarter earnings results this week. The biggest companies reporting include Amazon on Tuesday and Apple on Thursday.

So far, S&P 500 earnings are on pace to rise about 1.6% year-over-year, with the bulk of that gain being driven by mega-cap tech companies. Investors will keenly be listening for guidance from company CEOs as focus shifts to the rest of the year.

"As valuations are trading near the upper end of their 20-year range, earnings will need to be the catalyst to drive the market higher from current levels," Adam said.

4. "Manufacturing and service activity improving?"

The release of ISM Manufacturing data last month showed a surprise jump into expansion territory for the first time since October 2022. New data from the index will be released on Wednesday, with expectations that the expansion will continue into its second month. Meanwhile, ISM Services data will be released on Friday and is expected to show continued expansion for the 15th consecutive month.

"This is important, as the services sector makes up a larger portion of the economy relative to manufacturing. In all, these figures reflect an economy that is expanding, albeit at a more modest pace," Adam said.

5. "Will the labor market's resilience last?"

Finally, the April jobs report set to be released on Friday will be closely watched by investors. The median economist forecast is for 250,000 jobs to be added to the economy. And if the unemployment rate remains below 4%, it will tie the second longest consecutive streak below 4% on record.

But there are signs of a slowing jobs market.

"The employment subsectors within ISM Manufacturing and Services readings are both in contraction territory and the number of job openings is near the lowest level since March 2021. The jobs report will provide an update on the strength of the labor market," Adam said.

Source: Business Insider

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Cohen

Economic

Net mortgage approvals for house purchases rose from 60,500 in February to 61,300 in March, the sixth consecutive rise and the highest number of net approvals since September 2022, the latest Money and Credit statistics from the Bank of England show.

Conversely, net approvals for remortgaging with a different lender decreased from 37,700 to 34,200 over the same period.

Gross lending rose from £18.6 billion in February to £20.1 billion in March, the highest amount since February 2023. Likewise, gross repayments increased from £16.6 billion to £19.5 billion over the same period.

The average interest rate paid on new mortgages decreased by 17 basis points, to 4.73% in March, while the rate on the outstanding stock of mortgages increased by 2 basis points, to 3.50%.

Tony Hall, head of business development at Saffron for Intermediaries, commented: “It certainly feels like the mortgage market recovery is underway as gross lending and mortgage approvals continue to rise. All eyes are now on when we might see that first base rate cut since the onset of the pandemic, which should drive more consumers back to the market.

“The economy still faces a number of challenges, with inflation falling at a slower rate than many expected, and this could delay a rate reduction by the Bank of England. Wage inflation and a more timid approach to rate cuts in the US are also leading some analysts to predict that the base rate may stay put until Q4. However, it’s refreshing that the debate about the Bank of England’s position has clearly shifted to when, and not if, rate cuts will happen. This speaks volumes about where the market is now compared to even six months ago, and we look forward to helping advisers and borrowers take advantage of the opportunity this provides.”

CEO of Octane Capital, Jonathan Samuels, said: "Stability is key when it comes to mortgage market health and while we’re yet to see interest rates fall, a freeze since September of last year has certainly steadied the ship and provided the nation’s homebuyers with the confidence required to re-enter the market.

As a result, we've now seen the level of mortgages being approved climb consistently for the last six months and this is a significant sign that the market is slowly, but surely, returning to full health.”

Gareth Lewis, managing director of MT Finance, added: “With net purchases continuing to rise, people are willing to put their hands in their pockets and buy property. The longer this continues, the more positivity and consumer confidence this will generate.

“It is also encouraging that the net interest rate has gone down again but the problem is that Swap rates are rising, and product pricing is going up accordingly. However, even if rates do creep up a little, this shouldn’t have too negative an impact as confidence in house prices and where we are going to be from a rate environment is unlikely to suppress too much optimism.

"When the sun comes out, people are far more positive so while mortgage rates are edging upwards, this is unlikely to have such a negative impact as it would have done in say, December.

"Businesses are also borrowing which is a good sign, as lenders are confident that their propositions are sustainable.”

Source：financial reporter

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Warren Takunda

Central Bank

Economic

Global shares headed for their first monthly loss in six months on Tuesday ahead of a slew of economic data, earnings and the U.S. Federal Reserve's policy meeting, while the yen weakened a day after suspected intervention lifted it from 34-year lows.

The MSCI All-World index (.MIWD00000PUS) was last up 0.1% on the day, carrying some of the positive momentum from a rally on Wall Street the day before. But the index is heading for a loss of 2.2% in April, its worst monthly performance since October.

In Europe, investors digested earnings from some of the region's biggest companies, including lenders HSBC (HSBA.L), whose chief executive announced his surprise retirement and Santander (SAN.MC), as well as consumer heavyweights such as Adidas (ADSGn.DE) and airlines like Lufthansa (LHAG.DE).

In terms of earnings, Amazon (AMZN.O) will be in the spotlight when it reports first-quarter figures after the closing bell. Apple (AAPL.O) reports later this week.

Results have been vying with macroeconomic data for the position of biggest catalyst for the broader market and this week brings the all-important U.S. employment report, as well as the outcome of the Fed's two-day policy meeting on Wednesday.

Right now, the Japanese yen is in stark focus after surging suddenly on Monday from a fresh 34-year low of 160.245, with traders citing yen-buying intervention by authorities.

Markets had been anticipating that Japan might intervene to prop up the yen after the currency fell more than 10% against the dollar this year.

On Tuesday, the yen was back under pressure, leaving the dollar up 0.37% at 156.92.

Japan's top currency diplomat, Masato Kanda, said on Tuesday authorities were ready to deal with foreign exchange matters around the clock, while declining again to comment on whether the finance ministry had intervened a day earlier.

"We are ready 24 hours, so whether it's London, New York or Wellington (hours), it doesn't make a difference," the vice finance minister for international affairs told reporters.

MIND THE YIELD GAP

Vasu Menon, managing director of investment strategy at OCBC, said intervention alone cannot narrow the gap in interest rates that is largely driving the yen's decline.

The yen has been under pressure as U.S. interest rates have climbed and Japan's have stayed near zero, funnelling cash out of the yen and into higher-yielding assets.

"A lot now hinges on the outcome of the Fed policy meeting this week," said Menon.

Investors have continually had to dial back expectations for the timing and magnitude of U.S. rate cuts this year after hotter-than-expected inflation reports, with markets pricing in a 57% chance of a rate cut in September, CME FedWatch Tool showed.

"Either you believe that inflation fundamentals advocate for a structural rebound in inflation, or more, Q1 was a set-back and things are going get back into landing mode," Lombard Odier economist Samy Chaar said, adding that this second scenario was his base case right now.

"Inflation will be judge and jury of what the Fed does."

Traders are now pricing in 35 basis points of cuts in 2024, drastically below the 150 bps of cuts priced in at the start of the year.

The shifting expectations on U.S. rates have lifted Treasury yields and the dollar, dominating the currency market. Against a basket of currencies, the dollar was up 0.1% at 105.76. The index has risen over 1% in April and over 4% this year.

Meanwhile, futures on the S&P 500 and Nasdaq were down 0.1%, suggesting a touch of weakness at the open later.

U.S. stocks closed up on Monday, led by sharp gains in Tesla (TSLA.O) shares after the electric vehicle maker made progress in securing regulatory approval to launch its advanced driver-assistance program in China.

Oil prices edged up, pushing U.S. crude futures up 0.4% to $82.99 a barrel, and Brent crude up 0.3% to $88.69.

Spot gold was last down 0.9% at $2,313 an ounce.

Source: Reuters

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Cohen

Economic

Optimism in India’s growth shows little signs of slowing, but policy continuity will be crucial if it wants to see strong growth in the next five years, Rob Subbaraman, Nomura’s chief economist and head of global markets research Asia ex-Japan, said.

“The Modi administration in Modi 2.0 has done a very good job,” Subbaraman told CNBC last week, referring to the fact that Modi and his ruling Bharatiya Janata Party have won two terms in office since 2014.

India’s elections are underway and Modi is widely expected to win a strong mandate for a third term in office.

Nomura has projected that India’s economy could grow by an average of 7% in the next five years — if the current policies driving growth stay in place, Subbaraman said on Friday.

That projection is much higher than Nomura’s growth outlook for China (3.9%), Singapore (2.5%) and South Korea (1.8%) in the same period.

“With China’s economy slowing, India is likely to be the fastest growing Asian economy this decade,” Nomura said in a recent note.

“Irrespective of the election outcome, policy continuity and a focus on macroeconomic stability are important growth underpinnings,” the bank’s analysts added.

Under Modi’s rule, India’s economy is expected to grow 6.7% this year, compared to China’s predicted growth of 4%, Nomura’s projections showed. Large economies outside Asia like the U.S. could also see slower growth at 2.8% this year.

“The big thing that’s changing in India is investment,” Subbaraman said. “Investment as a share of GDP is starting to rise. All the stars are aligned for private capex to start igniting, including FDI [foreign direct investments].”

While Nomura is bullish on India, the firm’s chief economist for India and Asia (ex-Japan), Sonal Varma, warned in a note that headwinds remain and it’s crucial for India to ensure a stronger economy to boost employment.

“Stronger foundations do not necessarily mean that the economy is invincible. The current growth recovery, while strong, is still uneven, and there are risks from global spillovers.”

Medium-term growth drivers

India has ambitious plans to be a global manufacturing powerhouse, and investments into the sector are expected to boost its economy.

India’s Union Minister for Railways, Communications, Electronics and Information Technology Ashwini Vaishnaw told CNBC in February that India could clock up to 8% annual GDP growth for several years as it focuses on boosting its manufacturing capabilities.

In the interim budget announced earlier this year, the government earmarked 11.11 trillion rupees ($133.9 billion) in capital expenditure for fiscal year 2025, an 11.1% jump from the prior year.

However, Nomura noted that the share of India’s overall exports in global merchandise exports is still only around 2%, and it will continue playing catch up with other countries in Asia.

“The manufacturing takeoff is in its early stages, in our view, and the full impact should become visible over the next 3-5 years.”

India’s financial services sector, which contributes to approximately 7% of GDP, is also playing a more prominent role in hoisting the country’s economic growth, Nomura said.

“Just before the pandemic, India had a non performing asset problem and there was a big cleanup of the banks,” Subbaraman said. “The bank supervision and requirements among banks is better than it has been any time before.”

Source:CNBC

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ING

Economic

Broad-based decline in production

Manufacturing industrial production declined 3.2% MoM sa in March (vs revised 2.9% in February, 0.5% market consensus), with declines across all industries. Even though we think manufacturing will be one of the main drivers of growth this year, we are concerned that the strength will be quite narrowly concentrated in the semiconductor industry.

Semiconductor output declined -0.7%, but shipments rose smartly by 11.1% on the back of strong exports (14.5%) while domestic shipments were down -8.8%. Given that domestic chip usage is mainly for automobiles and electronic devices, the decline in domestic shipments suggests weak demand in legacy chip markets. However, strong exports suggest that demand for high-end chips remains solid, mainly driven by global investment in AI technology. Ongoing inventory cutting by semiconductor producers is also likely to be supportive of semiconductor production in the near term.

As for transportation equipment, motor vehicles (2.3%) and motor vehicle bodies (8.5%) rebounded but motor parts (-4.1%) and other transportation equipment (-5.9%) dropped more strongly. We think motor vehicle production is likely to recover but at a slower pace than last year.

High-end semiconductors will be the main growth driver

South Korea: Monthly Activity Data Suggest A Patchy Recovery Ahead_1

Retail sales rose 1.6% MoM sa in March, partially reversing the previous month’s 3.0% fall

The monthly gain in retail sales was mostly from strong automobile sales (11.3%) while other durable goods sales such as household appliances, telecom equipment, and furniture - were down. The three-month comparison dropped -0.2% showing that the underlying trend has been softening. Consumer sentiment and retail sales have held up relatively well, and we also saw a gain in private consumption in the recent GDP release. However, we believe that this will turn negative in the current quarter as tight financial conditions remain for longer than expected.

Investment should remain a concern for growth in the current quarter

Machinery orders dropped -18.7% MoM sa in March, with both public and private orders falling. Given the volatile nature of this data, we tend to focus on the three-month comparison trend, which deepened its contraction to -9.4% 3Mo3M sa in March. So, we expect facility investment to fall in the current quarter.

For construction, both orders (-20.8% MoM sa) and construction completed (-8.8%) declined in March. Construction completed have now declined for two months in a row after a sharp rise in January. The current run of data suggests that the unexpected 1Q24 construction GDP rebound was temporary and we expected it to turn negative in the current quarter.

GDP forecasts

Given the stronger-than-expected 1Q24 GDP result (1.3% QoQ sa vs 0.6% market consensus), we have revised up our annual GDP outlook from 1.7% YoY to 2.5% YoY. Forward-looking data point to weak investment and services activity, while we expect the net export contribution to growth to diminish given the recent fast rise in commodity prices. Private consumption is still rather puzzling, but as tight financial conditions become more extended, it will start to bite more seriously into consumption in the current quarter. In sum, quarterly growth is expected to decelerate sharply to 0.1% QoQ sa in the current quarter from 1.2% in 1Q24. We will fine tune our quarterly growth outlook as more data becomes available.

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Samantha Luan

Economic

Commodity

The aggressive gold buying by the Reserve Bank of India (RBI) also contributed to the rise in demand.

India's gold demand in value terms rose 20 per cent on an annual basis to Rs 75,470 crore during the January-March period of this year on volume growth as well as a rise in quarterly average prices by 11 per cent.

On Tuesday, the World Gold Council (WGC) released its global report 'Gold Demand Trends Q1 2024', showing that India's total gold demand, including both jewellery and investment, increased to 136.6 tonne in January-March this year from 126.3 tonne in the year-ago period.

Out of the total gold demand, the jewellery demand in India increased 4 per cent to 95.5 tonne from 91.9 tonne. The total investment demand (in the form of bar, coin among others) grew 19 per cent to 41.1 tonne from 34.4 tonne.

Sachin Jain, Regional CEO, India, WGC, said the rise in gold demand reaffirms Indians' enduring relationship with gold.

"India's continued strong macroeconomic environment was supportive for gold jewellery consumption even though prices reached a historic high in March leading to a slowdown in sales as the quarter ended," he added.

Jain expects the gold demand in India to be in the range of 700-800 tonne during this year.

If the price rally continues, he said the demand could be at the lower end of this range. In 2023, the country's gold demand was 747.5 tonne.

Asked about the factors driving demand growth in January-March, Jain told PTI, " Historically, eastern markets of the world including India and China respond when the prices are going down and there is a fluctuation, whereas western markets respond when the prices are going up.""For the first time we have seen a complete reversal where Indian and Chinese markets have responded to an increase in prices of gold," he said.

Jain said the demand for jewellery as well as investment products like bar, coin and ETF has gone up.

"The second reason for the increase in demand has been the buying by the central bank RBI," he said.

While the RBI bought 16 tonne of gold in the full 2023, it has already purchased 19 tonne in the first quarter of this calendar year, Jain highlighted.

He mentioned that the RBI has indicated that it would continue buying.

Asked about the outlook for the April-June quarter, Jain said the demand might slow down due to a sharp rally in gold prices and the ongoing election process.

As per the WGC data, India's gold demand in value terms rose 20 per cent to Rs 75,470 crore from Rs 63,090 crore.

Out of this, the jewellery demand grew 15 per cent to Rs 52,750 crore from Rs 45,890 crore, while gold investment demand went up 32 per cent to Rs 22,720 crore from Rs 17,200 crore.

The WGC also mentioned that the total gold recycled in India stood at 38.3 tonne in January-March, up 10 per cent from 34.8 tonne in Q1 2023.

"Total gold imports in India in Q1 2024 was 179.4 tonne, up by 25 per cent compared to 143.4 tonne in Q1 2023," the Council said.

The average quarterly price in Q1 2024 was Rs 55,247.20 per 10 gm of gold as against Rs 49,943.80 per 10 gm in Q1 2023 (without import duty and GST)"Q1'24 also saw healthy levels of gold bar and coin demand in India, up 19 per cent year-on-year at 41 tonne. This was on a par with Q1'22, which was itself the strongest first quarter since 2014," Jain said.

The price correction in February sparked investors' interest, with anticipation of a rebound driving purchases, he added.

"As the price rallied to successive record highs, investors remained bullish, contributing to the robust demand," Jain said.

Investments into gold ETF too saw positive inflows of over 2 tonne.

"Although Indian recycling volumes increased 10 per cent to 38.3 tonne in Q1'24, there were very few reports of distress selling. With a strong economy and expectations of a normal-to-good monsoon, there seems little desire to cash in on high gold prices at the moment," Jain said.

The current high gold prices might temporarily put a strain on demand, he said.

However, Jain said, "strong cultural and seasonal factors such as festivals, weddings helped by an expectation for a better monsoon and solid economic growth would support demand.

Source: Business Standard

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Ukadike Micheal

Economic

Commodity

Futures for Canada's primary stock index exhibited minimal movement on Tuesday, reflecting a subdued market sentiment as investors grappled with a mix of factors impacting asset prices. Despite the anticipation surrounding the U.S. Federal Reserve's impending interest rate decision and the release of significant domestic economic data later in the week, uncertainty prevailed, leading to cautious trading activity. At 6:36 a.m. ET, June futures on the S&P/TSX index remained flat, highlighting the subdued mood in early trading.

The commodity markets played a pivotal role in shaping investor sentiment, with contrasting movements seen in gold and oil prices. Spot gold prices experienced a decline of nearly 1% due to the strength of the U.S. dollar, exerting downward pressure on gold-related assets. In contrast, oil prices stabilized on Tuesday, buoyed by hopes of a potential ceasefire in Israel-Hamas talks, despite ongoing geopolitical tensions impacting oil supply dynamics. The fluctuations in commodity prices underscored the intricate interplay between global economic developments and asset valuations, influencing investor decision-making processes.

Across the border, all eyes were on the U.S. Federal Reserve, which was poised to announce its interest rate decision following a two-day meeting commencing later in the day. The outcome of this decision was expected to have significant implications for financial markets, as investors sought clarity on the central bank's monetary policy stance amid mounting inflationary pressures and economic uncertainties. Meanwhile, in Canada, market participants awaited the release of monthly gross domestic product (GDP) data, scheduled for 8:30 a.m. ET. This economic indicator would provide valuable insights into the health of the Canadian economy and potentially influence expectations regarding future interest rate movements by the Bank of Canada.

The Toronto Stock Exchange's S&P/TSX composite index had closed 0.2% higher on Monday, marking a milestone by surpassing the 22,000 threshold for the first time since the previous Tuesday. The index's performance was supported by strength in commodity-linked shares, underscoring the significance of the commodity sector in driving broader market movements.

In corporate developments, Scotiabank made headlines by appointing banking veteran Travis Machen as the CEO and group head of its global banking and markets unit, effective May 6. This leadership change signaled the bank's strategic focus on strengthening its position in the global banking landscape, reflecting broader trends within the financial sector.

Furthermore, attention was drawn to the upcoming earnings reports from gold mining companies such as OceanaGold and New Gold, among others. These quarterly earnings releases were expected to provide valuable insights into the financial health and operational performance of these companies, potentially impacting investor sentiment towards the broader mining sector.

Against this backdrop, market participants remained vigilant, closely monitoring developments in commodity markets, central bank policies, and corporate earnings reports. The dynamic nature of the financial markets underscored the importance of adaptability and risk management, as investors navigated through a complex landscape characterized by uncertainty and volatility.

While futures for Canada's main stock index remained muted on Tuesday, the broader market sentiment was influenced by a multitude of factors, including fluctuations in commodity prices, central bank decisions, and corporate developments. As investors awaited key economic data releases and corporate earnings reports, the financial markets remained poised for further developments, highlighting the importance of agility and informed decision-making in navigating the ever-changing investment landscape.