Europe
Markets in Europe have got off to a solid start to the month of May helped in no small part by a series of upbeat manufacturing surveys from Europe and the UK, and some decent Q1 company announcements, as investors push political concerns into the background.
All of the major European benchmarks have had a good day, the CAC40 hitting its highest point since late 2007, while the FTSE250 has once again posted a new record high.
Mining stocks have lagged behind a touch probably due to the weaker than expected Chinese manufacturing PMI numbers that we saw earlier today, and over the weekend, along with softer commodity prices, with Antofagasta (LON:ANTO) and Anglo American (LON:AAL) leading the fallers.
Banking shares have shrugged off comments from President Trump that the US might look at reinstate a variation of Glass-Steagall, probably down to the fact that talking about it is a long way from being able to do it.
Shares in Greece have had a good day after it was reported that the Greek government had reached a preliminary agreement with EU creditors on further cuts to pensions and tax free allowances. There was no mention of debt relief which is a key demand of the IMF for its future participation, which suggests that investors may be jumping the gun somewhat.
Germany has consistently opposed debt relief while the IMF have been insistent on it, and it is unlikely that the IMF will be able to bend the rules to fudge it like they did in 2010, given that the rules have since been changed. Any fudge is also unlikely to be approved by the US, given they are the IMF’s largest contributor.
BP (LON:BP) shares have outperformed today after reporting a return to profit in Q1 of £1.45bn, with revenues of $55bn, much better than expected. While this has been well received by the markets, the rise in net debt also points to concerns about the dividend given that BP’s breakeven price is at $60 a barrel, which means that unless that figure comes down the dividend could come under threat of being cut.
Standard Life (LON:SL) shares are also doing well, on the back of decent numbers from Aberdeen Asset Management after the company posted a 10.6% increase in first half revenue, as investors look ahead to the upcoming merger talks between the two businesses.
Shire Pharmaceuticals has also given a lift to health care stocks after reporting a 109% rise in revenues, helped in some small part by its merger with Baxalta last year. The company also reiterated its full year guidance for 2017.
US
Another record high for the Nasdaq yesterday as technology stocks continued to gain ground after last week’s decent numbers from Facebook (NASDAQ:FB), Amazon (NASDAQ:AMZN) and Google, (Alphabet (NASDAQ:GOOGL)).
It’s the turn of Apple (NASDAQ:AAPL) today after its shares hit a new all-time high ahead of its latest Q1 trading statement later this evening. With the launch of the new Galaxy 8 and no new products scheduled until the end of the year, Apple is playing second fiddle to Samsung (LON:0593xq) this month. Q2 numbers in the region of 51m iPhones sold and $33bn in revenue are needed for Apple to beat expectations.
Yesterday’s economic data showed that the recent softening seen in Q1 may well continue into Q2 after ISM manufacturing fell short of expectations.
With core PCE and consumer spending also softer than expected, the culmination of the latest Fed meeting tomorrow could offer some clues as to whether some Fed policymakers are concerned about the recent softness in some of the hard data.
FX
After three successive months of softer PMI readings, the UK manufacturing sector rebounded strongly in April to its best performance in three years, helped by a strong performance from new orders and output which saw the new work rise at its fastest rate since January 2014.
Export orders also saw decent demand from North America, Africa, Brazil and Europe, though higher import prices remained a concern. This has seen the pound hold up well, also shrugging off the weekend parlour games from Brussels about the recent meeting between UK PM Theresa May and Jean Claude Juncker, with the pound doing particularly well against the Japanese yen.
This continued resilience seems to underscore that markets are starting to turn a tin ear with respect to the twists and turns in the politics for now, and are focussing more and more on the economics.
The Japanese yen has suffered as a result of firmer US yields over the past couple of days, and a more positive risk environment.
Commodities
Gold prices have continued to look weak, drifting back towards the 200 day MA a level it broke above last month on the 11th April. The slightly more positive risk environment along with firmer US yields ahead of tomorrow’s Fed meeting is helping undermine prices.
Crude oil prices have struggled to shrug off concerns about rising US output as rig counts rose again for the 15th week in a row, while data showed that Russian oil output continued to decline in April. While we saw a rally in prices early on today any rebound could struggle to gain traction unless there is firm evidence that OPEC and non-OPEC members are able to agree on extending the output cap until the end of this year, when they meet later this month.
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