This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Asian markets look set to follow in Wall Street’s footsteps, with many returning from the Labour Day holiday.
Softer than expected US Q1 GDP from last Friday and President Donald Trump’s latest comment on breaking up of the big banks appear to have dealt little impact upon the markets. Meanwhile, positive earnings expectations from the tech sector tipped the comprehensive S&P 500 index into gains and the tech-heavy NASDAQ index to record high at the start of the week.
An examination of the earnings reports thus far finds the technology cluster showing the strongest performance in earnings surprise as a whole. Of the 50% companies that have reported earnings, 92% were seen surprising on the upside in terms of earnings and 64% when comparing sales. The week would see the likes of Apple and Facebook reporting Q1 earnings.
Besides earnings, Tuesday also marks the start to the US Federal Open Market Committee (FOMC) meeting. Although no change in monetary policy has been expected for May’s meeting, the post meeting statement would still be one to watch for on sentiment surrounding recent data weakness.
Certainly, the market has been exhibiting a sense of calm despite the series of events we have seen of late and earnings reports would most likely be the one to thank. The CBOE volatility index, Wall Street’s fear gauge, was last seen plummeting to a 10-year low at 10.05, showing the extent of optimism. Moving ahead, May could be a more trying month with the absence of earnings coming through.
Closer to home, the concern have been rightly paid to China’s official manufacturing PMI figures which arrived weaker than expected at 51.2. April’s figure had significantly moderated from the prior 51.8 and the market’s median estimate at 51.7. Nevertheless, this remain the 9th consecutive month in which we have seen PMI thrive in expansionary territory and the private Caixin gauge would be the one to watch for in the day for regional markets.
Positive leads from Wall Street look set to power Asian markets at the start of the week. Broadly higher April Nikkei manufacturing PMIs in the Asian region are also expected to support prices in the day. Early movers in the region including the KOSPI 200 and Nikkei 225 were last seen clocking strong gains and the local Singapore STI is expected to follow. Notably, DBS Group Holdings Q1 2017 earnings arrived this morning, trending in line with UOB with a surprise on the upside for earnings, boding well for the local index. Non-performing loans have held steady at 1.4%, likely to ease some of the concern for investors.
For the day ahead, watch China’s Caixin PMI, RBA’s monetary policy decision and Indonesia’s inflation update. The local Singapore market will also find April’s PMI figures released after market’s close.
Yesterday: S&P 500 +0.17%; DJIA -0.13%; DAX -0.05%; FTSE -0.46%
.jpg)
