Somethings for everyone
- Friday’s US labour data bring some good news • Payrolls increase by 175k, below the 240k expected • Unemployment ticks up by 0.1% to 3.90% • Average hourly earnings tick down 0.1% to 3.90% • The participation rate remains unchanged at 62.7%
- Markets anxious for some sign of cooling in the economy salute the data with a rally in equities and bonds
- As usual, a pinch of salt is recommended: the payroll estimate error is 45k, and the data is subject to ample revisions
- The first rate cut has now been brought forward from December to September
- But, a data-dependent Federal Reserve will be eagerly parsing the next inflation data
US Earnings - on track
Q1 earnings so far are 7.0% above expectations
- 80% of the companies in the S&P 500 have reported actual results for Q1 2024 to date
- Of these companies, 77% have reported actual EPS above estimates, above the 10-year average of 74%.
- More than 55% of S&P 500 companies have reported expanding margins
- Expectations have been low for Healthcare, high for Energy
- This week, 56 S&P 500 companies are scheduled to report results for the first quarter.
Meanwhile, in Europe
- Eurozone’s services PMI* shows some positive momentum. At 53.3, the index is steadily above 50 and improving on the previous month
- This, coupled with an improvement in the Sentix Investors’ Confidence, seems to confirm some improvement in the area’s economic momentum. At country level, periphery beats core
EUR IG Bonds, well supported ...
- First four months of the year with a large supply of new issues accompanied by great underlying resilience
- The end of the earning season could herald another intense phase for new issues
- Spreads are less attractive now, but it is still a buyers’ market in light of an underlying improvement in the macroeconomic environment and solid issuer fundamentals
- The market seems well disposed to medium-long duration as well
- Despite the large volume of issues, there is no market imbalance, in the second half of the year it will be necessary to observe the absorption capacity of high yield
Elsewere ...
- Some JOY For JPY: after a sharp decline, evidence of intervention by the Bank of Japan, estimated in $30bn, revives the currency, but… will it last? The markets will test the BOJ’s resolve
- Better rainfall allows a welcome recovery in traffic through the Panama canal.
- A detour via the Magellan Strait adds 23+ days and 6’000+ miles to a ship’s journey
Macron Alert
- President Macron returns to the Sorbonne and paints a somber picture of Europe’s future. Macron flags three major dangers:
- Geopolitics: Russia’s threat to Europe require a new European security framework
- Technology and China: Europe must invest massively in five areas: artificial intelligence, quantum computing, space, biotech and new forms of energy such as hydrogen and SMRs*. Building industrial scale is paramount, as is containing China’s drive to export its way out of the domestic slowdown
- A challenge to democracy coming from resurgent nationalisms and disinformation
- Macron will meet Xi Jinping who is visiting Europe for the first time since March 2019. After France, Xi will visit Hungary and Serbia –an odd itinerary which is hardly accidental
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