Despite posting their best month since October 2015, European stocks finished April with a whimper, falling sharply, after a raft of economic data showed that for all the concerns about how bad the economic data is set to be in Q2, the lockdowns imposed in March also extracted an even heavier than expected economic price in Q1.
Markets appeared to have convinced themselves, that for all of the damage that was coming in Q2, that Q1 wouldn’t be anywhere near as bad as yesterday’s initial estimates suggested it would. The fact that it was even worse, and with a lot of the more recent data still to come through, prompted a sharp reassessment of the likelihood of a v-shaped recovery, that had prompted a lot of the gains that we’ve seen in the past month.
Another reason for yesterday’s losses may well have been some month and week end profit taking, given that a number of European countries have today off for May day.
US markets also finished April on the back foot, as another 3.8m jobless claims took the overall total of claims to over 30m, while personal spending for March cratered to a record -7.5%.
In spite of yesterday’s losses, we still saw the S&P500 post its best month since 1987, posting a gain of 10.7%, helped by strong gains from the various FAANG stocks of Facebook, Amazon, Apple, Netflix and Google’s Alphabet.
Amazon’s latest numbers showed that the resilience of its business model in spite of the recent crisis, as sales beat expectations, coming in at $75.5bn, however profits were hit due to extra costs due to coronavirus related expenses. Amazon also said that they expect to spend $4bn of its profits in various areas on other coronavirus related expenses. In Q2 the company said it expected to see net sales come in between $75bn and $81bn.
Apple also managed to beat expectations for its Q2, posting revenue of $58.31bn, boosting the dividend as well as its buyback program by $50bn, though the lack of any guidance saw the shares slip back after hours.
Asia markets, having finished April very much on the front foot, have started May in the fashion that European and US markets finished April, with markets in Australia and Japan ending the week sharply lower, with the rest of Asia closed for May 1st holiday. The latest Japanese manufacturing PMI came in at 41.9, below expectations of 43.7.
This in turn looks set to see the stock markets that are open here in Europe start the month on the back foot.
After yesterday’s raft of disappointing economic numbers from Europe and the US, attention is set to turn back to the UK economy, with the final manufacturing PMI for April, which is expected to come in at 32.8.
We’ll also be getting a look at the latest mortgage approvals, consumer credit and lending numbers for March. It wouldn’t be a huge surprise to see a significant drop off in all of these numbers, given the news flow that we saw in the lead up to the lockdown being announced.
Mortgage approvals are expected to fall to 58k from 73.5k, which net consumer credit is expected to fall back slightly to £0.7bn.
We’ll also get sight of the latest ISM manufacturing report from the US for April, which is expected to drop from 49.1 in March to 36, with new orders set to fall sharply. In March the employment component was 43.8, while for April it is perhaps not too surprising that no estimate has been made.
EURUSD – yesterday’s break above the 1.0900 has seen the euro move up towards the 1.1000 area, and the highs two weeks ago. This remains the next barrier for aa move towards 1.1200. Support now comes in at the 1.0900 level as well as the recent lows at 1.0720.
GBPUSD – the break through the 1.2500 area has seen the pound break higher towards the 200-day MA and April highs at 1.2645. The 1.2500 area now becomes support for a potential move through 1.2650 and the 1.2750 area.
EURGBP – coming under pressure near the 0.8670/80 area, the rebounds keep getting shallower, keeping the risk towards the downside and the 0.8620 area. Resistance remains at the highs this week at the 0.8780 area.
USDJPY – found support juts above the 106.20 area, we’ve seen a rebound to the 107.50 area. A break through here could well see a revisit of the 108.20 area initially, as well as the 200 day MA at 108.50.
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