Such was the optimism in the market Friday, market participants have shrugged-off more bombastic trade-war commentary from US President Trump on Friday, with the President stating he is “torn” on the viability of the phase-one trade-deal.
3. US earnings season continues to disappoint: The S&P500’s run back above the 2900-mark on Friday night comes as a disappointing US reporting season winds down. 86 per cent of companies have reported now for Q1. According to data compiled by Fact Set, the reporting period has delivered a blended EPS contraction of -13.7 per cent, with only 66 per cent of companies exceeding analyst estimates further quarter.
Of greater import to market participants, earnings growth expectations have been considerably downgraded this quarter, with EPS growth across the S&P500 for Q2 being cut to -42 per cent.
4. Growth beats safety on Friday: Growth signals in broader financial markets were more positive Friday, but still point to economic headwinds for the global economy. Rates on US interest rate futures contracts pulled-out of negative territory, with US Treasury yields climbing marginally across the yield curve.
Commodity currencies outperformed, pushing the AUD/USD 0.56 per cent higher for the session, and the Japanese Yen declined. Gold prices also pulled back on higher global bond yields, shedding 0.78 per cent, while the pro-growth bent to the day’s trade pushed oil prices up by over 5 per cent.
5. RBA delivers dim outlook; a glimmer of hope remains: Australian economic fundamentals were put into focus on Friday, with the RBA’s Statement on Monetary Policy putting forth a dimmer outlook for the Australian economy. The central bank outlined its base case whereby the local unemployment rate will top-out at 10 per cent, and GDP ought to contract by -5 per cent in 2020.
In what might be considered a glimmer of hope for the Australian economy, the RBA’s baseline forecasts are based on a re-opening of the economy by the end of September – a date that may be considered on the conservative side, given the announcement of the Federal Government’s plan to begin easing social restrictions on Friday.
6. ASX200 rallies Friday, likely to open flat today: Courtesy of the Government’s announcement, sectors most acutely hit by the COVID-19 shut down outperformed the broader ASX200 on Friday. Consumer discretionary stocks lifted 2.16 per cent, real estate sector stocks gained 1.84 per cent, and the banks added 0.7 per cent. It underpinned a 0.5 per cent rally for the ASX200, which failed to once again break convincingly above the 5400-mark.
It appears the index may have a similar issue at the outset of trade this morning, with SPI Futures pointing to a broadly flat open for the market.
7. Australian jobs data in focus this week: While less high-impact than last week, several events jump out on the calendar as key event risk risks for the markets in the week ahead. Locally, the biggest will likely be Australia’s labour market data, which is expected to reveal 550,000 Australians lost their jobs last month, and that the country’s unemployment rate leapt to 8.3 per cent.
Internationally, US CPI and Retail Sales figures will capture attention, as will German GDP data. While the RBNZ will also hand down their policy decision for the month, with little change of policy settings tipped there.
8. Market watch:
ASX futures up 3 points or 0.1% to 5405
- AUD +0.6% to 65.32 US cents
- On Wall St: Dow +1.9% S&P 500 +1.7% Nasdaq +1.6%
- In New York: BHP +2.4% Rio +2.5% Atlassian -2%
- In Europe: Stoxx 50 +1% FTSE +1.4% CAC +1.1% DAX +1.4%
- Spot gold -0.8% to $US1702.70 an ounce in New York
- Brent crude +4.8% to $US30.88 a barrel
- US oil +5.1% to $US24.74 a barrel
- Iron ore +5% to $US88.60 a tonne
- Dalian iron ore +0.8% to 637 yuan
- LME was closed Friday for a UK holiday
- 2-year yield: US 0.16% Australia 0.20%
- 5-year yield: US 0.33% Australia 0.37%
- 10-year yield: US 0.68% Australia 0.88% Germany -0.54%
This column was produced in commercial partnership between The Sydney Morning Herald, The Age and IG
Information is of a general nature only.