Originally published by Rivkin Securities
Global equity markets extended gains from Monday as concerns around a pending US government shutdown faded and US earnings impressed investors. The US government faces a shutdown on Saturday unless lawmakers can pass a last minute funding bill. Few details have been released about what is contained within the spending bill however Trump has apparently backed away from his demand that congress include funding to build a wall along the US-Mexican border. A big focus will be the release of the principles of Trump’s tax plan at some point today.
The Dow Jones Industrial Average gained +1.12% boosted by better than expected sales and earnings from Caterpillar Inc (NYSE:CAT) and McDonalds Corp BDR (SA:MCDC34) and both the S&P 500 and Nasdaq 100 rose +0.61% and +0.73% respectively with the Nasdaq 100 closing at a new all-time high surpassing the 6,000 level. 30% of S&P500 companies have now reported first quarter earnings with 76% beating estimates which is above the four quarter average of 71%. Overall US earnings look set for double digit growth year on year with expectations now for 11.5%, up from 10.1%.
European equities also continued to gain following the first round of French presidential elections on Sunday. Given the accuracy of polling compared with the actual outcome of the first round there is a great deal of confidence that Independent Emmanuel Macron will win the second round in two weeks’ time, projected to take 62% of the vote compared with Le Pen’s 38%. The Euro STOXX 600 gained +0.21%, as did the Euro Stoxx 50 up +0.16% and CAC 40 up +0.17% and the euro gained +0.53% against the US dollar.
Demand for safe-haven assets slipped with spot gold closing at a two-week low, down -0.93% while the Japanese yen dropped -1.21% against the dollar and -1.75% against the euro. US treasury yields rose with both the two and 10-year yield up +4.2 and +6.1 basis points respectively with a fairly similar story in European debt markets.
The Australian dollar was -0.41% weaker on Tuesday and the equity market was closed for the ANZAC day public holiday. This morning we do look set to take a positive lead from overseas markets with ASX SPI200 futures up +25 points. Locally the focus will be on the release on inflation figures out at 11:30am AEDT with year-on-year growth forecast at +2.2% and the RBA trimmed mean of +1.8%.
Data releases:
· Australian CPI (QoQ & YoY Q1) 11:30am AEDT
· US Crude Oil Inventories (April 21st) 12:30am AEDT