European Closing Report
European cash equity markets are broadly higher at the closing bell (FTSE +0.5%, DAX +1.6%, CAC +0.9%). Recent geopolitical tensions continue to recede with investors holding out hope that the recent Syrian airstrikes will not lead to a prolonged offensive in the region.
We have also seen a higher open on Wall Street as earnings seasons gets into full flow; Goldman Sachs and Johnson & Johnson have dropped while UnitedHealth and Netflix have risen after their respective corporate updates. In fixed, core EU bonds are ahead with weaker-than-expected macro data providing support – UK average weekly earnings came up short of expectations while German ZEW saw a notably weak print for the expectations component. Treasuries are little changed meanwhile as stronger-than-expected prints for housing starts, building permits and industrial production limited any upside. Switching to currencies, the Dollar Index is ahead having touched a new daily high in recent trade on the aforementioned data releases. The Swiss Franc is the weakest of the G10 currencies. At the Fed, San Francisco President Williams said he sees the median interest rate between 3-4% by 2020. He also said he sees inflation at or above the two-percent goal for another couple of years. Still to come today, possible comments from Chicago Fed President Evans at 18:10 BST and earnings after the Wall Street close from IBM and United Continental.
Key Headlines/Data: * Italian CPI Data (Mar F):
– CPI M/M +0.3% versus +0.4% expected, previous +0.4%
– CPI Y/Y +0.8% versus +0.9% expected, previous +0.9%
* German economic institutes raise their 2018 global growth forecast to +2.2% from +2.0%, 2019 to +2.0% from +1.8%
* UK Labor Market Data:
– Average Weekly Earnings 3M/YoY (Feb) +2.8% versus +3.0% expected, previous +2.8%
– Average Weekly Earnings Ex. Bonus 3M/YoY (Feb) +2.8% versus +2.8% expected, previous +2.6%
– ILO Unemployment Rate (3M) (Feb) 4.2% versus 4.3% expected, previous 4.3%
– Employment Change (3M/3M) (Feb) +55K versus +55K expected, previous +168K
– Claimant Count Rate (Mar) 2.4%, previous 2.4%
– Jobless Claims Change (Mar) +11.6K, previous 9.2K revised to 15.1K
* ECB Governing Council member Hansson said he sees more confidence in inflation developments.
* German ZEW Survey Data (Apr):
– Current Situation 87.9 versus 88.0 expected, previous 90.7
– Expectations -8.2 versus -1.0 expected, previous -5.1
* BOJ to forecast inflation nearing 2 percent target in fiscal year 2019, 2020 – sources (Reuters):
– The Bank of Japan will likely maintain its view inflation will reach its 2 percent target next fiscal year and project it will stay near that level the following year, in new forecasts due out next week, sources familiar with its thinking said.
* Chinese Central Bank have lowered the reserve requirement ratio (RRR) by 100 basis points for most commercial banks, effective April 25th.
* US Treasury Secretary Mnuchin said they are seeing very strong economic growth. He also said Trump’s recent tweet to Russia and China regarding their currencies was a warning shot.
* White House Economic Adviser Kudlow said China is offering a constructive reaction in the trade dispute
* US Corporate News:
– Goldman Sachs (-1.3%): Q1 EPS $6.95 versus $5.58 expected | Q1 Revenue $10.04 Bln versus $8.74 Bln expected | Raises dividend to $0.80/share
– Johnson & Johnson (-1.5%): Q1 EPS $2.06 versus $2.01 | Q1 Revenue $20.0 Bln versus $19.4 Bln expected | Sees FY18 EPS $8.00-8.20 versus $8.10 expected
– UnitedHealth (+3.0%): Q1 EPS $3.04 versus $2.91 expected | Q1 Revenue $55.2 Bln versus $54.8 Bln expected | Sees FY $12.40-12.65 versus $12.54 expected
– Netflix (+8.1%): Q1 EPS $0.64 versus $0.64 expected | Q1 Revenue $3.7 Bln versus $3.7 Bln expected | Aded 1.96 Mln memberships versus 1.45 Mln expected
* US Housing Data (Mar):
– Housing Starts 1.319 Mln versus 1.267 Mln expected, previous 1.236 Mln revised to 1.295 Mln
– Building Permits 1.354 Mln versus 1.330 Mln expected, previous 1.321 Mln
* Canadian Manufacturing Sales M/M (Feb) +1.9% versus +0.8% expected, previous -1.0% revised to -1.3%
* IMF World Economic Outlook:
– Upgrades global growth forecast to +3.9% from +3.7% for both 2018 and 2019
– Beyond 2-year horizon, global growth is expected to soften
* US Industrial Production M/M (Mar) +0.5% versus +0.3% expected, previous +0.9% revised to +1.0%
– Manufacturing Production M/M +0.1% versus +0.1% expected, previous +1.3% revised to +1.5%
– Capacity Utilization 78.0% versus 77.9% expected, previous 77.7%
* San Francisco Fed President Williams said he sees the median interest rate between 3-4% by 2020. He also said he sees inflation at or above the two-percent goal for another couple of years
* China seeks trade firewall with U.S. allies in rush of ambassador meetings – sources (Reuters):
– China’s international trade representative held a series of meetings with the ambassadors from major European nations last week to ask them to stand together with Beijing against U.S. protectionism, according to four sources familiar with the discussions.
* Philadelphia Fed President Harker said the labor market is fairly tight.
US Closing Report
Technology stocks have led gains with Netflix up almost nine-percent after reporting after hours yesterday, while IBM are up over two-percent ahead of their earnings after the bell.
Shares in Southwest Airlines have dropped meanwhile after it was confirmed that a passenger had died following an engine explosion earlier today. In fixed, Treasuries have edged to new highs this afternoon despite some stronger-than-expected macro releases earlier today including housing starts, buildings permits and industrial production.
The Dollar Index is holding a minor gain while the Swiss Franc and Sterling are the weakest of the G10’s. At the Fed, Chicago President Evans said they can gradually raise rates without the risk of a surge in inflation, adding that they do not need to rise much above the neutral setting.
We also heard from White House Economic Adviser Kudlow said the US would like to see a free-trade agreement with Japan at some point. On TPP, he said there have been discussions and considerations but nothing concrete has occurred, adding that Trump is currently not convinced of the merits of joining the partnership.
Elsewhere, US crude oil futures settled at $66.52 (+$0.30). We also await earnings after the bell from IBM and United Continental.
* Atlanta Fed GDPNow (Q1) revised higher to 2.0% from +1.9%
* White House Economic Adviser Kudlow said the US would like to see a free-trade agreement with Japan at some point. On TPP, he said there have been discussions and considerations but nothing concrete has occurred, adding that Trump is currently not convinced of the merits of joining the partnership.
* Chicago Fed President Evans said they can gradually raise rates without the risk of a surge in inflation, adding that they do not need to rise much above the neutral setting.
* US President Trump said he will be discussing military, trade and security with Japanese PM Abe. He also said he hopes to have a meeting with North Korean leader Kim but it could not happen.
* Arming the world: Inside Trump’s ‘Buy American’ drive to expand weapons exports (Reuters):
– In a telephone call with the emir of Kuwait in January, U.S. President Donald Trump pressed the Gulf monarch to move forward on a $10 billion fighter jet deal that had been stalled for more than a year.
* US crude oil futures settled at $66.52 (+$0.30) | Brent crude futures settled at $71.58 (+$0.16)
Trading carries a high level of risk to your capital and may result in losses that exceed your initial deposit. You should first be aware of the risk and know what you do before you proceed with trading. Supplied information is not advice.