19 Apr

The Bank of Japan intends to keep its monetary policy soft. In the US, the reporting season is gaining momentum

April 19, 2023

By JustMarkets

The Dow Jones Index (US30) decreased by 0.03% at Tuesday’s close of the stock market, while the S&P 500 Index (US500) added 0.09%. NASDAQ Technology Index (US100) lost 0.04% yesterday. Concerns about interest rate hikes have returned to the markets in recent sessions as hawkish signals from Fed officials and signs of some resilience in the US economy have created uncertainty about when the Fed will suspend its rate hike cycle. Traders expect the Federal Reserve to raise rates by 25 basis points at its May meeting and bring the rate to a restrictive level of 5.25%.

Goldman Sachs Group Inc (GS) shares fell more than 1% after the broker reported first-quarter earnings that fell short of expectations triggered by the sale of consumer loans at its Marcus consumer business. Bank of America (BAC) reported increases in both the top and bottom lines, driven by a 25% jump in net interest income. Johnson & Johnson (JNJ) reported better-than-expected quarterly results but also noted that lawsuits indicating that its talcum powder products cause cancer persists. JNJ shares fell more than 2%. Lockheed Martin Corporation (LMT) also reported first-quarter results that beat expectations thanks to improvements in its supply chain, sending its shares up more than 2%. Netflix Inc (NFLX) posted a weak report. The company added fewer new customers than expected in the first quarter and delivered below analysts’ estimates for the next three months. Netflix shares initially fell by 11% in after-hours trading after the report was released but then quickly recovered.

Equity markets in Europe mostly rose. German DAX (DE30) gained 0.59%, French CAC 40 (FR40) added 0.47%, Spanish IBEX 35 (ES35) increased by 0.41%, and British FTSE 100 (UK100) closed on Tuesday up by 0.38%.

UK labor market data came out mixed. Estimated vacancies fell by 47,000 in the last quarter. The average pay index came out better than forecasts, but jobless claims rose by 28.2k with an expected 2.5k decline. The unemployment rate rose from 3.7% to 3.8%. Money market pricing in the May meeting now suggests an 83% probability of a 25 bps interest rate hike by the Bank of England. If today’s UK inflation figures do not show a slowdown, the Bank of England is likely to remain firm on another rate hike.

US oil inventories declined by 2.7 mln barrels last week. Oil prices were little changed on Tuesday as upbeat oil consumption data from China (the biggest importer) offset concerns that a possible interest rate hike in the US could slow growth.

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Asian markets traded flat yesterday. Japan’s Nikkei 225 (JP225) gained 0.51%, China’s FTSE China A50 (CHA50) added 0.53%, Hong Kong’s Hang Seng (HK50) ended the day down by 0.63%, India’s NIFTY 50 (IND50) fell by 0.26%, and Australia’s S&P/ASX 200 (AU200) ended Tuesday negative by 0.29%. Rising interest rates are unfavorable for Asian indices as higher yields undermine the attractiveness of high-risk assets and also limit foreign capital inflows into the region.

Japan’s major manufacturers remain pessimistic for the fourth consecutive month as concerns over Western banks have exacerbated the slowdown in global growth, dampening prospects for an export-driven recovery. A Tankan survey showed that the economy is on track to recover from the coronavirus, supported by service sector companies, although the slowdown has hit manufacturers in global demand.

Japan will continue on course to meet the central bank’s 2% inflation target by continuing to ease monetary policy, even though it may take time, BoJ Governor Kazuo Ueda said on Tuesday, outlining his stance on maintaining soft conditions.

S&P 500 (F) (US500) 4,154.87 +3.55 (+0.086%)

Dow Jones (US30)33,976.63 −10.55 (−0.031%)

DAX (DE40) 15,882.67 +93.14 (+0.59%)

FTSE 100 (UK100) 7,909.44 +29.93 (+0.38%)

USD Index 101.74 -0.37 -0.36%

Important events for today:
  • – UK Consumer Price Index (m/m) at 09:00 (GMT+3);
  • – UK Producer Price Index (m/m) at 09:00 (GMT+3);
  • – Eurozone Consumer Price Index (m/m) at 12:00 (GMT+3);
  • – US Crude Oil Reserves (w/w) at 17:30 (GMT+3).

By JustMarkets

 

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.


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