Monday Market Minutes: A Waiting Game
Markets in Australia, Europe and the US are anticipating more economic data this week that could provide greater insight into inflation’s progress and the strength of economic activity across much of the world.
Consumer and producer price inflation this week for Australia, consumer inflation in the EU and America’s PCE inflation on Friday will temper market sentiment ahead of key meetings of central banks in Australia, the US, Britain and the EU in the first two weeks of May.
That explains why there was an outbreak of nerves in markets late last week and now traders' attention is now on the forthcoming data - especially Personal Consumption Expenditure report on Friday and the first estimate of first quarter GDP growth, and then the week later the April jobs report.
So it was little surprise that red ink ruled on Friday on the ASX and will be back at the start of trading today - the ASX 200 fell 0.42% on Friday and last week and will be looking at a tiny 8 point fall this morning - so essentially a flat start.
US earnings reports were mixed but in yet another surprise, Elon Musk’s Tesla on Friday restored some of the surprise price cuts made earlier in the week.
Cynical investors noted that the price cuts and a weak first quarter performance saw Tesla shares drop 10% on Thursday.
Friday’s small rise in the price of its older model EVs saw the shares end the day up 1.3% but they were still down more than 11% for the week.
All told, the S&P 500 rose 3.73 points to 4,133.52 on Friday. The Dow added 22.34 points to close at 33,808.96. The Nasdaq rose 12.90 points to 12,072.46. The indexes each posted a slight loss for the week of between 0.1% and 0.4%.
For the year so far, the S&P 500 is up 294.02 points (7.7%), the Dow is up 661.71 points (2%) and the Nasdaq is up 1,605.97 points (15.3%).
While US shares fell Eurozone shares rose 0.3% and Japanese shares were up 0.2%. But Chinese shares fell 1.5% and Australian shares lost 0.4% with falls in resources stocks offsetting gains in finance, industrial and property shares.
Bond yields rose, but oil, metal and iron ore prices fell (See commodities report). The $A fell back under 67 US cents to end the week at 66.91 after touching a low of 66.77 US cents
Bond yields held relatively steady. The yield on the 10-year US Treasury, which influences mortgage rates and other loans, rose to 3.56% from 3.54% late Thursday.
The yield on the two-year Treasury, which more closely tracks rate expectations for the Fed, edged up to 4.17% from 4.16% late Thursday.
Markets in Europe also ended with small gains Friday on encouraging news of an improvement in economic activity across the EU, while exchanges in Asia closed lower earlier in the session.
Meanwhile, the US March quarter earnings season steps up again this week with more big companies are on deck to report profits and revenues.
Coca-Cola reports its latest results on today, followed by McDonald’s and Microsoft and Google’s parent company, Alphabet, on Tuesday.
Airline maker Boeing and Meta Platforms, Facebook’s parent, will report results on Wednesday. Investors will get more details on the health of the airline industry when American Airlines and Southwest Airlines report financial results on Thursday, along with internet giant Amazon.
Intel, Texas Instruments also due to report, as will a string of drug companies - Novartis, Eli Lilly, Bristol-Myers and Abbott Labs.
Caterpillar, Comcast, Honeywell, Vale (the big Brazilian iron ore group), General Motors are also down to release their latest data.
Friday sees energy giants Exxon Mobil and Chevron both report results - Exxon has already warned of a likely fall. French energy giant Total is also reporting.
Companies have so far been beating Wall Street forecasts this earnings period. Analysts had originally forecast this would mark the sharpest drop in S&P 500 earnings per share since the pandemic hit in 2020.
Analysts polled by FactSet expect profits to contract by 6.2% for companies in the S&P 500, better than the 6.9% estimate a week earlier.
"Overall, 18% of the companies in the S&P 500 have reported actual results for Q1 2023 to date. Of these companies, 76% have reported actual EPS above estimates, which is below the 5-year average of 77% but above the 10-year average of 73%.
"In aggregate, companies are reporting earnings that are 5.8% above estimates, which is below the 5-year average of 8.4% and below the 10-year average of 6.4%,” FactSet reported on the weekend.
Tuesday sees a big meeting for Canadian resources company Teck, which wants to split itself into two companies - one holding its coking coal mines in western Canada and the other holding its copper and metal interests in Canada and South America.
Global resources giant Glencore has been trying to frustrate that proposal and force the meeting to be called off with two conditional offers and hints of a third.
But the meeting will happen and Teck will split with the controlling family and major shareholder, the Sumitomo group of Japan lending support to the split.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.