by Pinchas Cohen
Stocks shoot-up on averted US shut-down: yen, Treasuries, gold retreat
Global stocks rose on a temporary fix by the US Congress which will avert a government shutdown for now—delaying the possibility till September. The move in equities occurred despite weaker economic data in the world’s two largest economies and trading partners—slower than expected growth in China’s factories, and the slowest growth in a quarterly US GDP in three years, only 0.7%, on waning consumer spending.
Both releases cast doubt on global growth after optimism on the economy and earnings pushed stocks to new records during April.
The MSCI Asia Pacific Index advanced 1.25% in April, for a fourth straight month of gains. Japanese shares advanced to the highest level since March, after their best week of the year last week.
The TOPIX closed on Friday at 1,539.77, only 26 points from its high. The Japanese yen declined for the fifth out of six days, alongside Treasuries and gold.
Oil closed Friday at $49.33, up $0.36, or 0.78% higher than its lowest close of the month, on Thursday, at $48.97. It's currently heading lower again.
Trading will be muted today due to the Labor Day/May Day holiday across Europe including the UK, Germany and France as well as much of Asia including China.
This coming week, markets will focus on the following:
- Today: US personal spending data, ISM manufacturing for April.
- Tomorrow: Australia monetary policy decision; after last week’s report of rising inflation, economists expect the benchmark interest rate to remain unchanged at 1.5 percent, for the ninth consecutive month.
- Tuesday / Wednesday: FOMC two-day meeting, culminating in a rate decision Wednesday afternoon. It's expected the Fed will hold steady, keeping the rate unchanged within a target range of -0.75-1.00 percent. However, savvy investors will sift through the Fed's language for clues on the US central bank's expectations, including potential future rate hikes—irrespective of their predictive value. Whatever the result, expect an almost-certain market reaction.
- Tuesday / Thursday: Caixin China manufacturing and services PMIs.
- Friday: Perhaps the month's premier economic release, the US nonfarm payrolls report.
Corporate earnings from global companies including Apple (NASDAQ:AAPL), ConocoPhillips (NYSE:COP), Facebook (NASDAQ:FB), Tesla (NASDAQ:TSLA) and Alibaba (NYSE:BABA).
On May 7, the second and decisive round of the French presidential elections takes place. Far-right candidate Marine Le Pen said today that, if elected, she would immediately begin negotiations on a eurozone exit.
Market Movers
Currencies
The yen fell 0.32 percent to the lowest level since March, to 111.86 vs the dollar. Over the past week it has weakened the most since the Fed raised US interest rates in December. It is currently above the 50dma for the first time since March 15.
The pound fell 0.20% to 1.2926. Could this be a delayed reaction to German Chancellor Angela Merkel’s hard line comments against the UK on Brexit, when she said last Thursday that they’re delusional, thinking they’ll get off easy?
Note, the euro kept rising that day, as well as the following day, Friday, adding another three-quarters of a percent. Currently, the euro remains flat at $1.0896.
Stocks
The MSCI All-Country Index churned up less than 0.1 percent today while the Asia Pacific Index gained 0.2 percent.
Japan’s TOPIX Index gained 0.5% today, to reach its highest level since March 29. This after last week’s biggest weekly gain of the year, 2.72 percent.
S&P 500 futures futures edged up 0.1 percent, after last week’s 1.5 percent gain.
Commodities
Gold fell 0.45%, to $1262.70 an ounce, the bottom of its 4-day congestion and a weekly decline of 1.3 percent, paring its annual advance to 10 percent.
WTI crude dropped 0.1 percent to $49.02, after fluctuating between $49.06 and $49.20 between 3:00 AM EDT and 4:20 AM EDT. Currently it’s churning at the $49.06 - $49.07 level.
Bonds
The U.S. 10-year Treasury yield gained two basis points to 2.30 percent, after falling for three consecutive sessions.