US markets trade into the red over the Easter holiday period

As our market was closed for the long weekend the US markets slipped into the red. The SP500 on Thursday closed 2.4% lower, was closed Friday, and then finished flat overnight. This has left out futures indicating an open at 7,518 which is 5 points lower than Thursday’s close.

What was more notable was the move in commodities with Crude now back to 107.57 US a barrel, Copper is looking to test an all-time high at 4.90 and many agricultural products also coming back to March highs. Corn futures broke the march highs and is now trading at an all-time high.

This shows that there is still pressure on inflation out there, which could continue to put pressure on Central banks of the world. There is much debate on whether the central bank’s intervention will solve the issue which seems to be more supply based. Demand has come back after much of the world has come out of Covid lockdowns, but there are still many supply disruptions that need fixing. Adding the War in Ukraine, lockdowns in China and now protests at Libya’s oil fields, markets still have a lot to digest.

This week’s focus will be on US reporting with a massive lineup of US top companies. Tonight, we Have J&J, Netflix, IBM, and Hasbro to name a few. Analysts will be looking for indications of how companies are faring considering the rise in costs. This reporting season will highlight the types of companies that will benefit or struggle in this environment.

Australian Outlook

The XJO is expected to open flat this morning, following similar leads from the U.S last night. Both markets were closed for good Friday, and we were closed yesterday.
Keep in mind that usual participants may either have reduced vole or remain on holidays as next week is also a short week thanks to ANZAC day.

The past few weeks have seen us track sideward in a tight range between roughly 7,550 and 7,450. This is despite strong falls in the U.S over a similar period. This is largely due to a reweighting of growth into value as the U.S sells down its tech. The reweighting has been prompted by the expectation of fast tightening in monetary policy from the Fed. Commodities are also strong and materials make up roughly 25% of the ASX 200. Coupled with our market being heavy in value stocks, it makes sense we have managed to hold up despite our typical leaders across the waters falling.

This morning, China’s GDP numbers came in stronger than expected, and beat last quarter despite some major city’s being in lockdown for weeks due to a Covid resurgence. Their industrial production also came in better than expected over the same period, but was 2.5% lower than the previous reading – again likely due to the lockdowns. Their retail sales were negative 3.5%, far worse than the expected 1.6%. Its hard to know how their GDP increased with both their industrial production down and their retails sales falling hard. It is likely due to government spending. A rocky China can affect our market.

On Tuesday we have building permits from the U.S and on Thursday their existing home sales. On Thursday we will also see local retail sales numbers and CPI from the EU. Powell will speak on Friday alongside Lagarde (head of the ECB). Aside from this, U.S earnings will continue this week.

US Markets

US shares closed slightly lower overnight after closing lower on Thursday. Each of the three major indices drifted slightly lower on Monday evening, though movements were small either way. On Thursday US retail sales were largely stronger than expected, as was industrial production. Overnight we also saw stronger than expected earnings from Bank of America, which is a positive sign for US domestically focused financials. Five of the eleven sector groups of the SP500 closed higher overnight, with energy stocks faring the best after a further rise in the oil price. Financials also fared well after the Bank of America report. Healthcare stocks were the worst performers, followed by Consumer Staples.