What grabbed the headlines last week?
Wall Street was looking comfy, trotting higher as the rain came down on Saturday morning in Sydneham.
The rainmaking of a weaker-than-expected jobs report saw a deluge of buying in the US Tech sector.
In a timely display of maudlin activity, the US economy added but 175k jobs in April, a notable step down from March’s 315k jobs.
The counted number of unemployed Americans on the hock went higher to 3.9% from 3.8% while average hourly earnings eased to 3.9% YoY from 4.1%.
This, I saw – in a a rosy looking headline somewhere around the Washington Post – is what they call a ‘Goldilocks’ jobs report.
Suddenly the Americans are back in the interest rate market, pricing in a second 25bp Fed rate cut before year-end.
For the week in New York, the Dow Jones gained 1.14%, the Nasdaq added 1%, and the S&P500 found 0.55%.
Apple shares rose of course, after the iPhone trickster posted a year-over-year revenue decline in its fiscal Q2 earnings report after the bell on Thursday.
This however, was a beat on gloomy Wall Street’s expectations. The tech giant’s sales fell 4.3% from the prior year, coming in at $90.75 billion. Analysts anticipated $90.01 billion. So. Boohoo.
According to IG Markets’ market analyst Tony Sycamore, Wall Street was encouraged by some fair earnings drops from the Mag 7 and by Fed Chair Powell’s comments that unexpected labour market weakness could see the Fed cut earlier than thought.
“A 25bp rate cut has been pulled forward to September with a second 25bp rate cut priced for December,” Tony says.
“While expectations of additional Fed rate cuts would typically be expected to boost regional global stock markets when they re-open this week, news over the weekend that Warren Buffet’s Berkshire Hathaway has reduced its holding in Apple by about 13% and intends to continue increasing its cash holdings, will raise eyebrows given the Sage of Omaha’s phenomenal track record.”
At home, the S&P/ASX 200 (XJO) Index closed a rather woozy week of ups and downs some 0.7% for the better. Ultimately legged-up by the punching on Wall Street and the local good/bad news of weaker-than-anticipated retail sales report for March, which tempered expectations around the possibility of another RBA rate hike.
The home team’s response to the muting of bond worries triggered buying in the rate-sensitive recover (see below).
However, some of April’s best-performing areas of the market encountered some profit-taking… and that was most definitely not local resources.
The ASX200 finished 53 points (+0.70%) higher last week at 7629.
Seven of the benchamrk’s 11 sectors closed in the higher over the last week.
The Real Estate and IT sectors did it best, ahead 3.14% and 2.31% over the past five sessions.
Consumer Discretionary (2.14%) and Financial Sectors (+1.33%) also made strong moves.
The Consumer Staples (-2.28%), Energy (-1.81%), Materials (-0.30%) and Utilities (-0.20%) all ended the week in various negative shades of red
Resources plays did some quiet rotating. It’s out with gold stocks, in with uranium and hello again to the new metals producers.
Uranium comeback kids incl:
Silex Systems (ASX:SLX) +24.6%, Bannerman Energy (ASX:BMN) +22.8%, Deep Yellow (ASX:DYL) +18.5% and Paladin Energy (ASX:PDN) +17.8%.
And nu metals:
IGO (ASX:IGO) +11.4%, Pilbara Minerals (ASX:PLS) PLS) +10%, Mineral Resources (ASX:MIN) +9.4%, Liontown Resources (ASX:LTR) +9.4%, and Lynas (ASX:LYC) +6%.
The Week Ahead
In the States, this week’s economic calendar is macro-lite, thank the largely AWOL God of Financial Journalists.
The main highlights will be a heavy week of market massaging Fedspeak sucking up investor attention from facts to policymaker feelings re: Federal Reserve’s monetary stance.
The only other key indicators look like the prelim read of the Michigan Consumer Sentiment thingy and the usual paper bag sucking weekly jobless claims.
Brazil’s central bank is expected to slash borrowing costs by another 50 basis points, bringing the benchmark Selic rate down to 10.25%. But they also have Madonna playing a free concert on a beach.
There’s some interest in the S&P Global Services PMI.
The Bank of England is expected to keep monetary policy unchanged following a drop in the inflation rate to 3.2% in March, the lowest since September 2021.
The rate remains above the 2% target, but Governor Andrew Bailey is optimistic that British inflation is on track to meet the target.
The Poms will also be forced to dine out on preliminary UK Q1 GDP, business investment, foreign trade balance, industrial production, and construction output. My feeling is these will be complainy with some drizzle.
Across the channel, the trash await Europe’s monetary policy meeting accounts and cash rate calls will pop for the perpetually angry Swedes and Poles.
Other upcoming data includes Euro Area retail sales, Germany and France balance of trade, Italy’s industrial production and retail sales, Spain and Switzerland jobless rates.
In Istanbul, Turkey’s industrial activity and unemployment rate should be gripping.
Mainly because the inflation rate there is of Weimar Republic proportions.
Turkish inflation in March accelerated to 68.50% from 67.07% in February. What’s scary is that it’s the highest since… just November 2022.
The central bank of Turkey left its key one-week repo auction rate steady at 50% two weeks ago, in line with market expectations, following an unexpected 500bps hike in March.
Yup. They raise in hundreds of bps.
Closer to home, China drops April trade figures – can a lift in overseas demand support domestic manufacturers amid pessimistic gauges for domestic consumers? I for one don’t care.
The world’s second largest economy, but biggest bummer of a government will also update its current account with first-quarter figures.
The central bank which lives on the edge – the Bank of Japan reveals its Summary of Opinions – like a statement on monetary policy (but sans any discernable policy) which currency traders will fret over considering the Japanese central bank’s cray-cray policy positions so far this year and the potential smack these give the yen.
Japan will also release its balance of payments for March, set to unveil some of the impact of the yen’s weakening.
At our place, the RBA is expected to hold its key interest rate unchanged on Tuesday at 2.30pm in Sydenham.
US Earnings
Yeah. This is still happening.
Notable US corporates on the block this week include Messrs Walt Disney, Twilio, Lyft, Uber, Airbnb, Robinhood, Roblox, Dropbox and Palantir.
The Economic Calendar
Monday May 6 – Friday May 10
MONDAY
CN Caixin Services PMI
ID GDP Growth Rate
TUESDAY
BR S&P Global Services PMI APR
US Fed Barkin Speech
US Fed Williams Speech
GB BRC Retail Sales Monitor YoY APR
JP Jibun Bank Services PMI Final APR
AU RBA Interest Rate Decision
AU RBA Press Conference
GE Balance of Trade MAR / Exports / Factory Orders MAR
GB Halifax House Price Index APR
FR Balance of Trade MAR
GB S&P Global Construction PMI APR
EA Retail Sales MoM MAR
MEX Consumer Confidence APR
BR Balance of Trade APR
WEDNESDAY
US RCM/TIPP Economic Optimism Index MAY
US Fedspeak Kashkari
GER Bundesbank President Nagel Speech
US API Crude Oil Stock Change MAY
GER Industrial Production MoM MAR
BR Retail Sales MoM
THURSDAY
US EIA Gasoline Stocks Change MAY
US Fedspeak Jefferson
US 10-Year Note Auction
US Fedspeak Cook
BR Interest Rate Decision
JP BoJ Summary of Opinions
CN Balance of Trade
CN Imports APR
GB BoE Interest Rate Decision
GB BoE Monetary Policy Report
GB MPC Meeting Minutes
GB BoE Gov Bailey Speech
MX Inflation Rate APR
US Initial Jobless Claims
FRIDAY
JP Current Account MAR
GB GDP MAR
GB Goods Trade Balance MAR
GB Industrial Production
GB Manufacturing Production
TR Industrial Production
TR Unemployment Rate MAR
CN Current Account Prel Q1
EU ECB Monetary Policy Meeting Accounts
BR Inflation Rate
IN Industrial Production MAR
IN Manufacturing Production MAR