US equities closed lower on Friday, although rose for the week as investors look ahead to earnings season as concerns over inflation and interest rates ease.
United States
Despite financial markets only pricing in one further rate increase in May, Federal Reserve Governor Christopher Waller on Friday said he favours further tightening to reduce inflation. “Because financial conditions have not significantly tightened, the labour market continues to be strong and quite tight, and inflation is far above target, so monetary policy needs to be tightened further” although will depend on incoming data. Elsewhere, Reuters reported that Atlanta Fed President Raphael Bostic is calling for a further 0.25% increase in May, followed by a pause as previous aggressive tightening is now beginning to impact the economy, warranting a pause as officials’ assess incoming data and try to limit the impact to jobs and growth. Data on Friday highlighted the impact of recent monetary policy tightening with retail sales, which are not adjusted for inflation, falling more than forecast adding to the case for a pause and likely lower rates in the coming months as the likelihood of a recession grows. Over the month of March, sales declined -1% compared to estimates of -0.4% with a core reading that excludes autos also falling more than forecast to -0.8%. Elsewhere, consumer sentiment ticked up slightly but remains at pessimistic levels, with the University of Michigan consumer sentiment survey for April rising to 63.5 from 62.
US Retail Sales (MoM %)
The S&P500 declined -0.21% along with the Dow Jones -0.42%, Nasdaq Composite -0.35%, and Russell 2000 -0.86% with the VIX down -4.1% to 17.07 the lowest level since January 2022. Major financials earnings benefited from rising interest rates with JP Morgan, Citi Group and Wells Fargo posting solid results. JPM’s profit climbed 7.55% after posting a 52% increase in profit to US$12.62 billion for the three months to March with Citi also up 4.78% after net income increased 7% for the quarter to US$4.6 billion and adjusted eps beat estimates of US$1.65 with an actual of US$1.86.
Europe
European equities also rose lifted by financials following strong earnings from major US banks. The Euro Stoxx 600 gained 0.58% along with the DAX 0.50%, CAC 0.52% and FTSE100 0.36% with major indices posting their longest weekly winning streak since December. Hermes International climbed 1.52% after reporting strong quarterly sales that rose 23% in the first three months of the year on the back on demand from Chinese consumers. Ahead for the week, UK employment data is in focus on Tuesday along with the ZEW economic sentiment surveys for the region. The ECB’s latest policy minutes will be released on Thursday along with consumer confidence for April and PMI reports will round off the week.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
Australia
The ASX is set for a modestly higher open this morning with ASX200 futures 12 points or 0.16% higher at 7,390. The index rose 0.51% on Friday reaching the highest level since March 7th. Gold and lithium miners were notable performers with IGO up 5.8% after receiving approval for the Western Australian government for a battery facility, with Pilbara Minerals also 5% higher. Continued strength in gold prices continues to support local miners with Northern Star up 4.35% along with Regis Resources 4.3% and Silver Lake 6%. Gold is hovering at one-year highs sitting at US$2,004 an oz having risen 12% this year. Karoon Energy lagged -5.4% after falling troubles at its Bauna site in Brazil noting it expects oil production at the lower end of guidance with costs at the upper end. In economic data this week, the latest RBA policy minutes will be released on Tuesday shortly before Chinese GDP for Q1 expected to show a 4% increase over the year. The Westpac Leading index for March will be released on Wednesday while PMI reports for April will finish off the week.
Commodities
Oil prices finished modestly higher on Friday with both WTI and Brent crude up 0.44% and 0.26% respectively to US$82.52 and US$86.31 a barrel. Iron ore futures in Singapore were -1.82% lower on Friday along with copper -0.39%, while other base metals including aluminium, lead, nickel and tin rose. Gold declined -1.77% on Friday to US$2,004 with silver also -1.86% lower at US$25.34 while Bitcoin rose 0.61% although is -0.5% lower over the weekend at US$30,286.
Economic Data
Tuesday 18th April
NAHB Housing Index (MoM Apr) 00:00
ECB Lagarde Speech 01:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via info@rivkin.com.au or by phoning +612 8302 3632.
