Equity Markets Mixed as US Earnings Season Gathers Momentum

Global indices concluded last week’s trading in mixed territory as investors weighed up key macro data publications and a ramp up Q1 earnings releases in the US. Flash US Purchasing Manager Indices (PMI’s), which were published on Friday, surprised on the upside with activity reaching its highest level in a year and new orders growing strongly[1]. Conversely, the latest weekly jobless claims data pointed towards growing weakness in the labour market whilst figures from the housing sector showed slowing new building permits issuance and construction starts[2]. Layered on top was a steady supply of S&P Q1 earnings results which generally speaking, have modestly exceeded expectations although forecasts are for a second consecutive quarter of declining profits[3].

The S&P500 was little changed, ending the week -0.1% lower with the tech heavy NASDAQ index declining -0.4%. In Europe, the MSCI ex UK index rose by +0.5% with gains in Germany and France offset to a degree by some weakness in Italy. The FTSE100 meanwhile rose by +0.5% with support coming from a drop in the value of Sterling. Moving to Asia, the Nikkei 225 in Japan added +0.3% as it maintained the steady momentum seen over the past 3 months whilst in China, the Shanghai Composite fell by -1.1%. Chinese equities came under pressure as tensions between the country and the US continued to rise.

As for commodities, oil prices retreated sharply on concerns relating to future demand if economies on both sides of the Atlantic were to slip into recession and weakening sentiment towards China. Brent Crude declined by -5.4% to $81.70 a barrel, its first weekly decline since March whilst copper shed -2.8%, ending the week at $8,779 a tonne. Regarding gold, the precious metal slipped by -1.0% to $1,978 an ounce on the back of US Dollar strength[4].

Week Ahead

The first reading of Q1’23 GDP is the key figure released in the US with the economy expected to have expanded by +2.0% against the previous quarter. Housing sector sales and durable goods orders are the other headline numbers to keep an eye on from the US this week. In the UK, it’s a quiet week for major data with UK government borrowing on Tuesday morning the only figure of note. On the Continent, Eurozone GDP is also released with modest growth of +0.2% expected whilst country specific figures are published throughout the week. It’s a busy week for Japanese activity with CPI inflation, unemployment, industrial production and retail sales due whilst the country’s central bank hosts its latest monetary policy meeting on Thursday. There are no major figures due from China on this occasion.

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[1] PMI by S&P Global, 24/04/23

[2] United States Census Bureau, 24/04/23

[3] T. Rowe Price, 24/04/23

[4] Refinitiv, 24/04/23

SJP Approved 24/04/23