Dubai: Although the month of April ended on a sour note, the new month starts with a week of better-than-expected earnings and employment figures at the world’s largest economy and this will keep investor sentiments upbeat.
Global stocks amassed significant gains in April, particularly as US REITs, consumer discretionary names and communications services companies outpaced the broader market, all more than 7 per cent higher. However, stocks had sold off on Friday, limiting the gains made during the month.
World stocks held near a record high as strong US economic data, robust corporate earnings and the US Federal Reserve’s commitment to continue supporting the economy fueled investors’ appetite for risk.
Strong US jobs data
Historically the November to April period is the strongest for stocks. Since November, there’s been a 30 per cent rally. Analysts say the adage ‘sell in May, go away’ may be somewhat appropriate this year since markets have done so well in the last six months.
In the US, April’s employment report is scheduled to be released Friday, and analysts are expecting a big number. Economists say payrolls in April could easily reach 1 million, after 916,000 jobs were added in March. Estimates range from about 700,000 to a forecast of 2.1 million from Jefferies economists.
According to Dow Jones, there is a consensus forecast of 978,000 among the economists it surveyed and the unemployment rate is expected to fall to 5.8 per cent from 6 per cent.
US eyes more progress
Meanwhile, US Federal Reserve Chairman Jerome Powell said in the past week that the central bank is still looking for “substantial further progress” in its goals for the economy.
The Fed has expected a temporary period of high inflation which it anticipates to see subside later in the year though some economists say inflation could be hotter than the central bank expects.
The US core personal consumption expenditures price index jumped 0.4 per cent in March. It is expected to go even higher in April and headline inflation in the consumer price index is expected to begin running at 3 per cent or better when it is reported May 12.
Companies report strong results
Companies in the US and elsewhere are leaping above expectations on first-quarter earnings, giving investors stronger confirmation that profit growth will be able to support the market this year.
Earnings are rebounding from last year’s pandemic-fueled lows. With results in from more than half of the S&P 500 companies, earnings are now expected to have risen 46 per cent in the first quarter from the previous year, compared with forecasts of 24 per cent growth at the start of the month.
About 87 per cent of earnings reports have come in ahead of analysts’ estimates for earnings per share, putting the quarter on track to have the highest beat rate on record going back to 1994. Some strategists say the stronger-than-expected earnings could drive a richly valued market higher still.
Asian stocks lose shine
While global stocks gained, Asian stocks had less luck, with MSCI’s ex-Japan index losing 0.6 per cent, following a softer-than-expected survey on China’s manufacturing.
“China’s economic recovery in January-March was strong but there are some doubts over whether you can take it at face value,” said Wang Shenshen, senior strategist at Mizuho Securities.
Mainland Chinese shares lost 0.25 per cent while Japan’s Nikkei shed 0.7 per cent on position adjustments ahead of a long weekend. Both markets will be closed through Wednesday.
European stocks seen dipping
European stocks are expected to dip slightly, with euro STOXX futures down 0.1 per cent and Britain’s FTSE futures trading 0.2 per cent lower.
MSCI’s broadest gauge of world stocks covering 50 markets, ACWI, however, was little changed and stood close to a record peak touched the previous day and up 5.1 per cent on the month.
On Wall Street, the S&P 500 also closed at an all-time high while the Nasdaq Composite hit an intraday record before paring some gains.