Monday, April 27, 2020

Asia Times: Equities closes week lower, ending a two-week winning streak ahead of a heavy earnings week

Tags
  • Dollar
  • Gold
  • Euro
  • Stocks
  • Oil
  • US earnings' season

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Market Recap: Equities closes week lower, ending a two-week winning streak ahead of a heavy earnings week

US equities gained on Friday, boosted mostly by shares of tech giants Apple and Microsoft. The passing of the US bill worth US$484bn in the US House of Representatives likely also helped lift stock prices on Friday. All three major indices closed more than 1% higher on Friday. 3M, Alphabet, Mastercard, Boeing, Microsoft, Facebook, Apple and Amazon are among the companies that are set to report earnings later this week.

Technology stocks lifted the S&P500, with the S&P500 sector gaining 2.11% on Friday. The surge in the sector was mostly driven by gains among the top technology stocks. Apple, Facebook, Tesla and Microsoft advanced 2.89%, 2.67%, 2.77% and 1.83% on Friday. The climb in tech stocks comes ahead of a busy earnings week, with earnings reports from FANG stocks set to be released. This may indicate that there may be investors who are more bullish on the technology sector, as they may be less affected by the lockdown during the first quarter of the year despite warnings from tech giants that the coronavirus pandemic will have material effect on earnings. In Apple's case, its new product launch for the mid-range iPhone SE which shares the iPhone 11 Pro’s A13 chip is gaining traction among consumers as an affordable phone in the flagship dominated smartphone market.

Indexes Daily Change (%) Net Change Closing Price
Dow Jones +1.11% +260.01 23,775.27
S&P500 +1.39% +38.94 2,836.74
Nasdaq +1.65% +139.77 8,634.52
*Source: Bloomberg

But Friday's gain wasn't enough to push stocks to the green over the week. Global major indices suffered losses over last week, ending the two-week gain in most major markets. Volatility seemed to continue to ease in the most recent week however, despite the rout in energy markets earlier in the week. This may possibly be due to muted trading ahead of the current earnings season as well as decelerating cases of the Covid-19 virus across the globe.

Indexes Weekly Change (%) Net Change Closing Price
Dow Jones -1.93% -467.22 23,775.27
S&P500 -1.32% -37.82 2,836.74
Nasdaq -0.18% -15.62 8,634.52
FTSE100 -0.60% -34.73 5,752.23
Euro Stoxx -2.74% -79.23 2,809.07
CSI300 -1.11% -42.52 3,796.97
Nikkei -3.19% -635.26 19,262.00
KOSPI -1.33% -25.52 1,889.01
ASX200 -4.46% -244.92 5,242.62
Hang Seng -2.25% -548.67 23,831.33
Straits Times -3.69% -96.44 2,518.16
*Source: Bloomberg

In the foreign exchange market, most major currencies strengthened against the dollar on Friday as risk started to ease. Oil's recovery over the week likely helped lift oil-related currencies. The euro strengthened the most against the dollar as countries in the EU start to loosen lockdown policies. Italy will start allowing families to visit each other, while France will ease its restrictions from May 11th. Spain will also lift restrictions on outdoor exercise starting May 2nd.

It will be a busy macro week for investors in addition to corporate earnings. The Fed, ECB and BoJ will be having their respective monetary policy meetings this week. BoJ officials will be meeting today and release its statement tomorrow. The Fed will announce its decision at 2am (GMT +8) with the ECB following up with theirs at 7.45pm (GMT +8) on Thursday. We likely will not see any changes to interest rates among the three major central banks. But targeted quantitative easing will likely be the focus for the week. We expect the BoJ to increase its efforts to stabilise its economy by expanding its asset purchase program.

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Safe haven assets were mostly muted on Friday. Gold inched lower but stayed well above the 1,700 level. The Japanese yen gained slightly against the greenback, but was mostly due to the easing of the dollar. US Treasuries were mostly flat as well. Benchmark 10-year yields fell slightly by 0.1bps to 0.60%.

Safe Haven Assets Daily Change (bps) Net Change Closing Price
Gold -0.05% -0.91 1,729.60
Silver -0.01% 0.00 15.04
JPY +0.08% +0.09 107.51
*Source: Bloomberg
US Treasury yields Daily Change (%) Yield (%)
2-Year +0.5 0.22%
10-Year -0.1 0.60%
30-Year -1.1 1.17%
*Source: Bloomberg

Oil markets extended into its third day of recovery on Friday, with Brent and WTI crude oil futures inching slightly higher thanks to countries starting to limit production ahead of the May 1st deadline for the most recent OPEC+ agreement.

Oil Futures Daily Change (%) Net Change Closing Price
Brent Crude +0.52% +0.11 21.44
WTI Crude +2.67% +0.44 16.94
*Source: Bloomberg

Asian stocks started the day mostly higher on Monday morning. The Nikkei and KOSPI were both trading higher in the first hour of the trading session, while the ASX200 was only 0.11% lower as of 9.04am (GMT +8). US futures were mostly flat to ahead of a heavy earnings week.

Asia Daily Change (%) Net Change Last Price As of (GMT +8)
Nikkei Index +1.40% +269.41 19,531.41 8:44:50 AM
KOSPI Index +0.89% +16.79 1,905.80 9:04:50 AM
ASX200 Index -0.11% -5.92 5,236.70 9:04:45 AM
*Source: Bloomberg

Companies reporting earnings for the day ahead include (all timings in GMT +8 where available):

  • PPG Industries Inc (Bef US Market Open)
  • Keurig Dr Pepper Inc (Bef US Market Open)

Economic releases for the day ahead include (all timings in GMT +8):

  • US Apr Manufacturing Business Index (Dallas Fed) (10.30pm)