Corporate earnings dominated the headlines in both Europe and the US last week. It was a quiet week in terms of macroeconomic news, and the corporate updates drove sentiment. It is fair to say, the first-half of the week and was stronger than the latter-half, for European markets.
The FTSE 100 and DAX reached fresh six month highs earlier in the week.
The S&P 500 and the Nasdaq 100 set record closes on Friday. Disappointing updates from 3M (NYSE:MMM) and Intel (NASDAQ:INTC) briefly soured sentiment in the US towards the end of the week, but it is worth noting the US indices are further along in their 2019 recovery than their European equivalents.
Google’s owner, Alphabet (NASDAQ:GOOGL) will be in focus as the tech giant will release its first-quarter figures after the closing bell.
The US growth rate caught many economists off guard last week. The economy grew by 3.2% in the first-quarter, while surveys from financial news outlets were predicting growth of between 2% and 2.3%. The euphoria post the report was short lived as the finer details showed that inventory spending was high, and fixed investment was low. Adding to the mix, there was also evidence that prices were falling, and that suggests weak demand. Traders realised the numbers were not as good as initially thought and investor confidence cooled, but the US economy is still in far better shape than most major nations.
The US core PCE reading will be released at 1.30pm (UK time) and economists are expecting the reading to be 1.7%, which would be decline from 1.8%. The reading is the Fed’s preferred measure of inflation, and any sign that demand is dipping is likely to confirm the Fed’s neutral to slightly dovish outlook.
Results for from the Spanish general election show that the Socialist Party claimed 123 of the 350 seats, and seeing as it fell short of obtaining a majority, it will need to strike a deal with other parties in order to form a working majority. It a common theme across Europe, the People’s Party, who were in power until 2018, suffered heavy declines and only took 66 seats, and the far-right party, Vox, won 24 seats.
Equity markets in Asia were mixed overnight. Chinese equities rebounded after a losing ground last week, while the NIKKEI 225 is slightly in the red.
Gold received a boost from the slip in the US dollar on Friday. Recently the metal has been at the mercy of the greenback, and given that the US dollar index nearly hit a two year last, it has mostly been bad news for gold. In light of the US economy’s relative strength, the gold market might lose further ground.
The oil market suffered a sizeable sell-off on Friday evening. The energy was already losing ground during the session, and then President Trump declared he contacted OPEC he instructed them to temper fuel costs. The oil producing nations must strike a balance between, earning a respectable amount from the energy, but at the same time, keeping the US happy.
Italian producer price index will be announced at 9am (UK time) and the consensus estimate is 2.9%, which would be a dip from the 3.1%.
Eurozone consumer confidence will be released at 10am (UK time) and the consensus estimate is for the reading to remain at -7.9.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1110 area. Resistance might be found at 1.3220.
GBP/USD – has been driving higher since early December, but has recently slipped below the 200-day moving average at 1.2968, and if it holds below that metric, it might retest the 1.2775 region. A rally might target the 1.3380 area.
EUR/GBP – while its holds below the 200-day moving average at 0.8822, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.
USD/JPY – has been largely been pushing higher throughout 2019, and a break above the 112.00 area, might bring 113.70 into play. 111.23 – 50-day moving average, might provide support.
FTSE 100 is expected to open 12 points higher at 7,440
DAX is expected to open 10 points higher at 12,325
CAC 40 is expected to open 1 point higher at 5,570
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