Markets update: A broadly positive week for equities

Markets | Mon 30 Apr | Author – Business & Finance

The US economy grew more than expected in Q1, but consumer spending was not the main contributor, says Ian Slattery.

ian slattery zurich

Ian Slattery

The US economy grew at a better-than-expected 2.3% annual rate in Q1. For the first time in recent memory, consumer spending wasn’t the biggest contributor, due to weakness in January and February.

A steady stream of strong Q1 earnings reports provides little support for US equities. The S&P 500 struggles for direction as the ten-year US Treasury yield reaches the 3% mark for the first time since 2014. Despite the negative headlines accompanying this threshold, stocks have often rallied during periods of rising rates.

Over half of S&P 500 companies have now reported and 82% have beaten their earnings-per-share estimates – this represents the best quarterly earnings data since 2009.

The US economy grew at a better-than-expected 2.3% annual rate in Q1. For the first time in recent memory, consumer spending wasn’t the biggest contributor, due to weakness in January and February.

Geopolitical headlines once again came to the fore on Friday as the leaders of South and North Korea met for the first time in over a decade to pledge to remove the risk of war and secure complete denuclearisation of the Korean Peninsula.

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Global equites posted a positive 1.3% return for the week, with Japan, the UK and Europe leading the way.

Local currency benefitted Irish investors with a 1.3% return from the US market despite a flat week in US dollar returns.

Commodities also endured another tough week with oil down 0.4%. Gold and copper also saw falls of -0.9% and -2.7% for the week.

THE WEEK AHEAD

Wednesday 02 May

On Wednesday, we expect the Federal Open Market Committee (FOMC) to keep the target range for the federal funds rate unchanged at 1.50-1.75% while it debates the effects of fiscal stimulus on the outlook.

Thursday 03 May

The year-on-year eurozone consumer price index (CPI) figure is expected to be 1.1%, up from 1%, while the Core CPI number is expected to be 1.2%, down from 1.3%.

Friday 04 May

On Friday, the consensus expects US non-farm payrolls to rise by 185,000, in line with longer-run trends in monthly employment growth. Recent months have seen volatility in the hiring data, with strong February hiring offset by weakness in March.

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