The Week That Was
US equities closed higher on Friday, buoyed by robust US earnings from technology giants Alphabet and Microsoft.
The Nasdaq soared by 2% largely due to these gains. The S&P 500 rose by 1%, and the Dow Jones Industrial Average increased by 153 points, as traders and investors set aside concerns over high inflation despite data suggesting continued price pressures.
Microsoft's shares climbed 1.8% following better-than-expected earnings and revenue reports. Alphabet's shares surged 10.2% to an all-time high of $171.95, further boosted by the company's announcement of its inaugural dividend. In contrast, Intel saw its shares drop 9.2% after a disappointing revenue forecast.
ExxonMobil's shares declined by 2.8% due to missed earnings expectations, whereas Chevron's shares modestly increased despite underwhelming profits.
For the week, the S&P 500 and Nasdaq recorded their best performances since November, with increases of 2.2% and 3.5%, respectively, while the Dow Jones edged up by 0.5%.
The JSE index climbed early and closed 1.4% higher at 75 371 on Friday, reaching a level not seen since mid-April, in line with global markets. This uptick was largely fueled by strong earnings from major US technology firms.
Concurrently, the latest PCE data indicated persistent inflation, supporting the US Federal Reserve’s stance on maintaining "higher for longer" interest rates.
On the local front, an Ipsos opinion poll released today suggests a potential decline in support for the ANC to below 50% for the first time since 1994, echoing similar findings from other surveys.
In the corporate sector, financials and industrials led the gains. Additionally, the state-owned enterprise Transnet reported a 1.5% year-on-year increase in total rail volumes, reaching 51.7 million tonnes at the end of March 2024, marking an improvement in operational performance.
Overall, the JSE saw a gain of about 2.7% for the week.
The Week Ahead
This week in the US, the focus will be on the Federal Reserve's FOMC meeting, with expectations that borrowing costs will remain at current levels.
Market participants will be keenly watching Chair Powell's comments for hints about the potential timing and scope of anticipated interest rate reductions, especially given ongoing inflationary pressures.
Economic highlights include the non-farm payrolls report, expected to show a rise of 210 000 jobs in April, down from 303 000 in March, with the unemployment rate projected to hold steady at 3.8% and monthly wage growth anticipated to stay at 0.3%.
Key releases will also include April’s ISM PMI surveys, JOLTs job openings, and the first-quarter employment cost index, among others.
The first-quarter earnings season continues with significant updates expected from major corporations like Apple, Amazon, and others.
In Europe, preliminary first-quarter GDP data and April consumer price inflation will be reported across major economies like Germany, France, Spain, and Italy.
The Eurozone is expected to show modest growth of 0.2% for the first quarter. Other important data includes retail sales from Germany and monetary indicators from the UK.
In Asia, China's PMI updates for April are anticipated to show a slight deceleration, while Japan will report consumer confidence and other key economic indicators.
Key Themes for the Week Ahead
US Federal reserve decision
Market participants are keenly awaiting the Federal Reserve's conclusion of their two-day policy meeting on Wednesday. They seek clues on whether the Fed anticipates interest rate cuts later this year. Federal Reserve Chair Jerome Powell emphasized that the central bank requires greater assurance that inflation will approach its 2% target before considering rate reductions. Despite March’s inflation data aligning with expectations, it has not significantly shifted market predictions, which now foresee a potential initial rate cut in September. This comes after expectations were revised from March to June, and then to September, as labour market and inflation data consistently exceeded forecasts.
US nonfarm payrolls
The upcoming monthly jobs report on Friday will offer fresh insights into the US labour market's robustness. Economists predict the addition of 243 000 jobs in April, a slowdown from March's 303 000. The unemployment rate is anticipated to hold steady at 3.8%.
Additional employment indicators this week include ADP's private sector hiring data and the JOLTS job openings report, which will further refine these expectations.
Furthermore, Tuesday’s employment cost index data will provide indications of whether inflationary pressures from the labour market are abating.
Technology sector US earnings
This week features earnings reports from the last of the "Magnificent Seven" megacaps, with Amazon reporting on Tuesday and Apple on Thursday. Apple's shares have dropped over 10% this year, and the company is expected to report a decline in first-quarter earnings following a 19% decrease in China smartphone shipments. Focus will also be on Amazon's cloud computing sector and its commentary on consumer spending. Recent strong earnings from Microsoft and Alphabet have supported a significant rally in the S&P 500, contrasting with mixed performances from Tesla and Meta Platforms. Some analysts have noted that despite potential earnings beats, the impact on stock prices may be subdued due to the strong equity run preceding earnings season and overstretched market positioning.
China PMI data
Market observers will closely monitor the release of Chinese manufacturing data for April, seeking signs of an acceleration in recovery for the world's second-largest economy.
Official purchasing managers' index figures are due on Tuesday, followed by the Caixin/S&P Global manufacturing PMI.
Positive results could alleviate concerns among policymakers striving to boost growth and investor confidence.
Chinese equities have seen a bullish turn from global investment houses, contributing to a 10% increase in the blue-chip index since February.
However, challenges remain, notably with the yuan's performance against a robust dollar and other major currencies, which complicates the situation for China's export-driven economy.
Eurozone economic data
On Tuesday, the eurozone will release key data on inflation and economic growth, which are expected to influence market expectations for a European Central Bank rate cut in June.
Inflation has decreased rapidly over the past year, prompting the ECB to signal a likely rate cut.
However, the growth outlook remains uncertain due to rising energy costs, persistent high services inflation, and ongoing geopolitical tensions impacting trade.
The region's GDP is estimated to have grown by just 0.2% year-over-year in the first quarter. April's inflation rate is anticipated to remain at 2.4%, consistent with March, amid escalating energy prices.
South Africa News
Former South African President Thabo Mbeki has committed to purging the African National Congress (ANC) of corruption, vowing to expel "rotten apples" and "thieves" from the party. At 81, Mbeki has returned to the political scene, actively campaigning for the ANC for the first time as it prepares for the upcoming elections in May.
An Ipsos opinion poll has revealed that support for South Africa's ruling African National Congress (ANC) has dropped to just over 40%, signalling a potentially significant political shift in the upcoming general election. This could mark the most substantial change in the country's political landscape since the end of apartheid.
Mineral Resources and Energy Minister Gwede Mantashe has voiced opposition to BHP's proposed acquisition of Anglo American, citing negative experiences with the global mining giant in the past.
Economic Calendar
In the upcoming economic calendar for this week, several significant events are scheduled to take place.
Source: incorporates insights from reports by Reuters and Investing.com.
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