Originally published by Rivkin Securities
US equity markets rallied on Monday in what was a light session for volume due to the Easter long weekend. Both the S&P 500 and Nasdaq 100 rose +0.86% and +0.85% with 468/505 securities on the S&P500 closing higher for the session and all sectors in positive territory. On Friday the US Dollar Index was flat before closing -0.27% lower on Monday following US CPI data that came in below expectations on Friday.
Year-on-year for March headline prices rose +2.4%, less than the +2.6% forecast and +2.7% prior. The core measure which excludes volatile items such as food and energy rose +2.0% also missing estimates for +2.3% and a previous reading of +2.2%. The bright news was that real average hourly earnings (YoY Mar) rose +0.3% from 0% previously after removing inflation. Still the data dampened expectations of a Fed rate hike in June, with the probability dropping from 54.8% to 46.5%.
US earnings will remain in focus this week with heavy weights including Goldman Sachs Group Inc (NYSE:GS), General Electric Company (NYSE:GE) and Johnson & Johnson (NYSE:JNJ) reporting. Analyst expectations are for +10.4% earnings growth year-on-year which would be the best year-on-year growth since Q1 2011.
The Chinese Offshore yuan rose just +0.05% on Monday despite stronger economic data. Year-on-year for Q1 the Chinese economy expanded at +6.9%, higher than the +6.8% forecast. Retail sales also topped forecasts, rising +10.9% vs +9.7% expected, as did fixed asset investment excluding rural rising +9.2% vs +8.8% and industrial production increased +7.6% vs +6.3% forecast. The data remains in line with the trend carried over from 2016, that the Chinese economy remains stable.
Safe-havens continue to remain relatively well supported, although the Japanese yen weakened -0.26% on Monday after touching the strongest levels in six months on geopolitical tensions. Spot gold also closed lower, down -0.07% after also touching the highest level in six months shown on the chart below. US treasury yields which are also a measure of safe haven demand were little changed, with the two-year yield flat at +1.2011% while the ten-year yield rose +2 basis points to be at +2.2481%.
Locally the Australian dollar was +0.18% higher on Monday, supported by the stronger Chinese economic data. The S&P/ASX 200 finished -0.74% lower on Thursday and we can expect a softer start to trading this morning with ASX SPI200 futures down -15 points.
Data releases:
· RBA April Meeting Minutes 11:30am AEDT
· US Housing Starts & Building Permits (MoM Mar) 10:30pm AEDT
· US industrial production (MoM Mar) 11:15pm AEDT
Chart 1 – XAUUSD (Spot Gold)
Source: Rivkin, RivkinTrader