Last week saw another strong performance from global equity markets with the S&P500 closing above 2,900 for the first time since last October, helped by better than expected numbers from JP Morgan as well as a record high for Disney after the company announced its Disney+ streaming service to take on Netflix.
The S&P500 now sits within touching distance of its record highs from last September, with all the fear and loathing of the end of last year, an almost distant memory, with optimism rising that we could see the US index push to a new record high later this month, if Q1 earnings seasons continues as it started at the end of last week. Today it’s the turn of Goldman Sachs and Citigroup to update the markets on their latest quarter.
European equity markets also made new six-month highs, helped by the momentum being created by US markets as well as optimism that we could well be starting to see the beginnings of an economic pickup in China, after several months of poor data. Chinese exports in March hit their highest level in five months in data released last week, suggesting that while domestic demand might be weak, there still seems to be some decent demand in the global economy. This week’s Chinese Q1 GDP and March retail sales and industrial production numbers should offer some extra colour here.
With the Federal Reserve minutes all but confirming that Fed is probably done for this year on rate hikes, and the ECB expected to look at further loosening options, the slide in yields across the board has made stocks a little more attractive again, with the latest communique from the International Monetary Fund at the weekend warning that global growth risks remains tilted to the downside. Last week the IMF slashed its forecasts for the global economy, citing concerns about high debt levels, trade tensions and geopolitical tensions.
In an Easter shortened week Asia markets have got off to a decent start taking their cues from easing concerns about Chinese data, and a strong end to the week for US markets. This looks set to translate into a positive start for European stocks this morning.
The pound is likely to remain becalmed now that a Brexit decision has been kicked into the long grass. While the avoidance of a no deal Brexit has been welcomed by the markets, the nature of it is likely to continue to hang over sentiment as well as the UK economy, for the next few months.
This week’s UK economic data is unlikely to offer much in the way of comfort, with inflation expected to edge a little higher in March, though this should be offset by a similar nudge up in wages growth. Retail sales on the other hand are likely to be much weaker in March. The 29th March original Brexit deadline is likely to have seen a slowdown in spending, though this is expected to be reversed in April, now that Brexit has been deferred.
EURUSD – edged up to the 1.1330 area last week but was unable to close above the 50-day MA. A move above 1.1330 could well see further gains towards the 200-day MA and 1.1450. The euro still has solid support at the 1.1180 area with interim support also at 1.1230.
GBPUSD – still treading water above the 200-day MA and 1.2960 area which continues to act as solid support. We also have support at last week’s lows at 1.3020, while the 1.3170 area still remains a key barrier on the upside and is likely to cap until we get a clearer political picture. Below 1.2960 opens up the 1.2800 area.
EURGBP – continues to edge higher but is currently struggling to make gains above the 0.8650 area. It needs to move above here to argue for a move towards the 0.8720 level. While below here the bias remains for a move back to the recent lows at 0.8500.
USDJPY – finding the March peaks at 112.20 a tough nut to crack for now, with a move through 112.30 targeting a move towards 113.00. The 111.20 area should now act as support, while a move below that opens up the 110.70 level again.
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