Breakfast Bites - Markets Unwinding the Fear

Rise and shine everyone.

Asian futures opened lower after news of the Middle East attacks and the selling from Friday’s US markets. China however, closed higher on news that the PBoC may start trading government bonds to manage liquidity; even property stocks rallied.

US Equity Futures have shrugged off the weekend news to trade higher in the pre-market. Oil has given up its gains from Friday and is trading lower, alongside the US Dollar. Gold is still trading higher. It would seem some of the fear has subsided and the rush to bonds has also calmed down. Yields are moving up again today, driven by the belly of the curve.

With markets having plenty of time to digest the news of the attack over the weekend, we’re seeing some of Friday’s fear reverse here. Global Currencies are gaining some strength against the dollar.

US Retail Sales Data today

The major news to look out for today will be the US Retail Sales data. After Friday’s Michigan Sentiment Data showed a higher reading for inflation expectations, the market will be looking for more confirmation of “good data” prevailing in order to see the Fed follow through with their rate cuts this year. If Retail Sales slow down, that may be an indication that Consumer Spending is slowing and therefore, that puts less upward pressure on inflation.

As a reminder, last month’s data did show an acceleration at the headline level but, the Control Group data which excludes volatile components (autos, building materials and gas) and is used to estimate personal consumption expenditures (PCE) was flat on the month after falling by -0.3% m/m in January (revised from -0.4% previously). So not a major impact on PCE.

Aluminum and Nickel Prices Rise

More bad news for global inflation. As the US put sanctions on Russia’s metals, we’re seeing Aluminum and Nickel Prices start to rise. The LME (London Metal Exchange) on Saturday banned from its system Russian aluminum, nickel and copper produced on or after April 13 to comply with new restrictions imposed over Russia's war in Ukraine.

The share of available aluminum stocks of Russian origin in LME-approved warehouses stood at 91% of total aluminum stocks in March. Russian copper stocks amounted to 62% of total copper stocks and the number for nickel was 36%.

Earnings Season - Week 2

Earnings season is set to pick up with the regional banks and many of the Dow components reporting this week. 11% of the S&P 500 will be reporting earnings this week.

United Health (UNH) is expected to cut their 2024 guidance for the first time since 2015.

Chart of the Day

Tech, Communication Services and Discretionary are set to be the biggest drivers of US Q1 EPS growth.

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