US stocks mixed as FTSE 100 ends day on high
The FTSE 100 (^FTSE) was on track on Monday for its best run since December 2020 with investors expecting inflation in the UK to return to single digits, while two of the three major indices in the US were in the red as investors await the release of more major earnings reports this week.
The Dow Jones (^DJI) fell 0.03% to 33,876.69 points, while the S&P 500 (^GSPC) declined 0.04% to 4,135.80 points. However, the tech-heavy NASDAQ (^IXIC) was in the green, gaining 0.03% to 12,126.97.
FTSE 100 and European stocks
The FTSE 100 rose 33 points, or 0.4%, to 7095 points, the highest in over five weeks. European markets were also in the green - the CAC 40 (^FCHI) in Paris went up 0.19% to 7,534 points, while the DAX (^GDAXI) in Germany gained 0.24% to 15,845.
It comes as investors are expecting inflation in the UK to return to below 10% for the first time since August, potentially ending further interest-rate increases.
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Russ Mould, investment director at AJ Bell, said the FTSE 100 is buoyed by a solid start to the US reporting season and a sprinkling of M&A activity, boosting market sentiment.
“While corporate announcements from the US are likely to continue to grab the headlines, a lot of the spotlight in macroeconomic terms is likely to be drawn by China with a raft of data set to be published imminently. For a FTSE 100 index teeming with resources stocks, this could have a big bearing given China is such a rapacious consumer of commodities,” he added.
In Asia, Tokyo’s Nikkei 225 (^N225) rose 0.15% to 28,536 points, while the Hang Seng (^HSI) in Hong Kong was up 1.24% to 20,693. In mainland China, the Shanghai Composite (000001.SS) gained 1.06% to 3,373 points.
Crude prices edged lower after advancing for a fourth week on signs of a tightening market.
US crude oil, or West Texas Intermediate (CL=F), fell 0.19% to $82.36 (£66.29) a barrel, while Brent crude (BZ=F) also dropped by 0.12% to $86.21 a barrel.
The pound (GBPUSD=X) gained against the US dollar by 0.04% to 1.24. Against the euro, the sterling (GBPEUR=X) also rose by 0.11% to 1.13.
In the UK, prime minister Rishi Sunak is set to get a boost this week with inflation expected to dip.
More than half of economists now think the Bank of England (BoE) will refrain from raising its key rate again, according to a Bloomberg News survey.
“Economic data released between now and the Bank of England’s May meeting hold the key to whether the central bank will lift rates again. We think the BoE will have reason to pause but markets disagree, having priced more than an 80% chance of another hike,” Ana Andrad of Bloomberg Economics said.
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Tina Teng, analyst at CMC Markets, said China’s better-than-expected trade balance data boosted sentiment in Asian stocks and highlighted how first-quarter GDP figures from the world’s second largest economy will be in the spotlight for investors this week as they navigate its economic trajectory.
Figures will be released on Tuesday, along with industrial production and retail sales data.
On Friday, S&P Global will release the German Flash Manufacturing and Services Purchasing Manager’s Index — a diffusion index that is a leading indicator of economic activity. The data could be a leading indicator of whether the German economy is strengthening or weakening.
Netflix and Tesla
US tech companies Tesla (TSLA) and Netflix (NFLX) are set to report earnings this week. Analysts say these will be the main market movers to steer investor sentiment.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said for Netflix that user growth and customer loyalty will be of interest.
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“Consumers are under pressure, and discretionary money remains very limited, causing them to cut down. As a result, we may not see as many customers willing to renew their membership. Another element that traders will consider is how the corporation has been able to get more members by pursuing password sharing,” he said.
Teng said: “Despite a record Q4 delivery number, Tesla’s profit margin is in doubt due to its generous price cuts. Also, whether the EV maker can achieve its 2 million delivery number becomes suspicious amid severe Chinese carmaker competition.”
Investors will also be watching earnings reports from Charles Schwab (SCHW) on Monday, the Bank of America (BAC) and Goldman Sachs (GS) on Tuesday, and Morgan Stanley (MS) on Wednesday.
They are likely to provide key insights into how some firms at the centre of last month's bank crisis fared during the quarter.
During the peak of March's bank crisis, Charles Schwab felt compelled to come out publicly and reassure investors its liquidity remained strong.
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Shares of the brokerage firm have lost nearly 40% so far this year, including a more than 30% drop in March alone. Investors have feared pressure on Schwab's deposit base as clients moved money from "sweep accounts" into higher-yielding alternatives.
Naeem Aslam commented: “Traders will be most interested in how much these banks are lending and how much they are tightening their lending requirements throughout the next few quarters.
“Remember that interest rates in the United States are at a multi-decade high, and financing isn't as simple as it once was. Furthermore, these institutions are aware that inflation remains considerably above the Fed's objective, implying that the Fed is likely to raise interest rates by 25 basis points a couple of times, posing a danger to the US economy,” he said.
Gold prices (GC=F) also started the week on a high note, as the price remained above the important support level of $2,000 in early Monday trade.
“Traders are focusing on the Federal Reserve's next monetary policy move while keeping a watch on US economic statistics, which heavily impacts their choice,” Aslam also noted.
He said the path of least resistance remains tilted to the upward, and noted that traders would prefer a buy-a-dip chance.
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