Early Morning Call: Japan's Nikkei 225 rises to new 18-month high

Indices overview

Friday was a negative session in the US, which meant that the Dow Jones and S&P 500 recorded a second straight week of losses.

Overnight equity market performance in APAC was mixed. Japan's Nikkei 225 rose to a new 18-month high, boosted by upbeat corporate reports and a weaker yen.

In Australia, gold miner Newcrest Mining says it will back Newmont's takeover offer. If approved by shareholders, the $17.8 billion deal would make Newmont the largest gold and copper producer in the US.

Macroeconomics

There is very little on the macroeconomic calendar this Monday.

In Japan, producer price index (PPI) rose by 5.8% in April year-on-year (YoY), slowing for a fourth straight month, an indication that consumer inflation should start to ease in the coming months. In March the index rose 7.4%.

At 10am, industrial production in the eurozone is forecast to fall 1.8% in March month-on-month (MoM), after a 1.5% increase the previous month.

Tomorrow, the market expects to know more about the Reserve Bank of Australia's (RBA) unexpected decision to raise rates at its last meeting. After an 11th rate hike in the last twelve months, the main rate now stands at 3.85%, as the Australian central bank is concerned that current inflation in the country is still too high.

Also tomorrow, focus will be on China retail sales for the month of March, eurozone GDP's growth rate in Q1, and Germany's ZEW economic sentiment for May. Economists anticipate a third straight month of decline of ZEW indicator to -5.5, from 4.1% the previous month. that would take it at its lowest level this year.

Later this week the market awaits first estimate of Japan's GDP for the first quarter (Q1) on Wednesday, and UK GFK consumer confidence on Friday.

Equities

Currys this morning unveiled a 7% drop in like for like sales for the full year (FY), but upwardly revised its full year earnings expectations, to between £110- and £120 million. Currys’ previous forecast was for £104Mln.

There is more to come in terms of earnings reports in the UK throughout the week. On Tuesday, we expect H1 earnings from Imperial Brands, Vodafone FY, and a trading statement from Greggs.

On the menu on Thursday: easyJet, BT Group, Burberry, and International Distribution Services, that's the old Royal Mail Group.

US earnings season is almost over, with just a few big names expected to report in the coming days, starting on Tuesday with Home Depot, followed by Cisco and Target on Wednesday.

And on Thursday Walmart and Applied Materials report. Home Depot, Target, and Walmart, some of the biggest names in the US retail sector, report earnings in a very challenging period of still high inflation. On one hand retailers are trying to pass on higher costs to their customers, on the other, shoppers are looking for ways to limit spending.

Walmart earnings expectations illustrate the tricky situation retailers are trying to handle. Revenue is anticipated to rise 5% to $148.50Bln, reflecting that rise in cost. But the Street expects earnings at $1.30 per share, which means a decline in profit margin.

Commodities

Oil prices traded lower on Monday, after recording a fourth weekly decline last week.

On Friday, Baker Hughes total rig count fell by 17 to 731. This was mainly due to a decline in working gas rigs. The number of oil rigs in operation fell by only two to 586.