(ATF) Economic events
Investor optimism this week will be capped by the surging coronavirus infection spread in many countries -- India, Japan, Thailand -– where it has staged a comeback. India in particular was seen as a big reopening trade with a 10%-plus economic rebound, but the record surge in daily infections saw the rupee sliding 2.7% against the dollar in April, a month when the greenback itself was weak. Indian stocks have logged a third week of losses and bad loan fears are mounting. Crude prices are also sliding as India is the world’s third biggest oil consumer.
But fundamentally the market is on a strong footing with a solid earnings reporting season and a sustained recovery in the world’s biggest economy. Of the 303 companies in the S&P 500 that have reported so far, 87.1% have topped analysts' earnings estimates.
Data on Friday showed US consumer spending rebounded in March amid a surge in income as households received additional Covid-19 pandemic relief money from the government.
The week ahead will see investors monitoring a swathe of manufacturing and services PMIs around the globe. Several economies will report trade data, retail sales and GDP updates. Interest rate decisions will be awaited from UK, Australia, Malaysia and Thailand. But the major economic event for the week will be Friday’s US jobs report where strong hiring is anticipated with the consensus for another bumper 925,000 gain in April to add to the 913,000 surge seen in March. The unemployment rate is also forecast to edge lower to 5.8% from 6.0%.
“Although 14 million jobs had been regained over the past year, the total payroll count in March remained some 8.4 million lower than its pre-Covid peak, highlighting how the labour market recovery has much further to go,” Chris Williamson and Jingyi Pan, economists at IHS Markit, said.
China will report a clutch of economic data and economists forecast moderating exports, strong imports and valuation-led gains in foreign currency reserves.
Barclays forecasts China’s export growth to ease to 25% year-on-year in April from around 30% in March with import growth rising to ~40% year-on-year versus 38% in March on recovering domestic demand and rising commodity prices. They forecast foreign currency reserves to rise by US$30 billion to $3.2 trillion in April largely due to positive valuation effects from a stronger euro and Japanese yen.
Investors piled into US liquidity funds in the week to April 28 as investors waited on a slew of key earnings reports, the conclusion of the US Federal Reserve’s latest policy meeting and US President Joe Biden’s address to both Houses of Congress.
The week saw earnings reports from technology bellwethers Alphabet, Amazon, Apple, Facebook and Microsoft and some of the numbers pushed US indexes to record highs. The five companies combined account for about 22% of the S&P 500's market capitalisation.
“While largely marking time, investors did stick to their recent game plan of buying exposure to global and US growth, taking out insurance against higher inflation, greening their portfolios and keeping cash on hand,” EPFR’s director of research Cameron Brandt said.
US Equity Funds posted their 11th inflow in the past 12 weeks; Global Equity Funds extended their longest inflow streak since 2017, while combined year-to-date flows into Equity and Bond Funds with socially responsible (SRI) or environmental, social and governance (ESG) mandates moved north of the $150 billion mark and Inflation Protected Bond Funds chalked up their 23rd consecutive inflow.
Money Market Funds pulled in $57.3 billion as they chalked up their eighth collective inflow in the last 10 weeks.
Emerging Markets Equity Funds posted consecutive weekly outflows for the first time in eight months as investors were influenced by China’s talk of policy normalisation and India’s out-of-control pandemic, while US vaccination rates surged and massive stimulus spending plans saw flows move to the world’s biggest economy.
US Equity Funds attracted fresh money for the 11th time in the past 12 weeks, and fresh money piled into Europe Equity Funds for the third straight week, their longest such run since early 3Q20 as the vaccine rollout gathered pace.
But Japan Equity Funds saw a seven-week run of inflows come to an end during a week when global attention was firmly on US fiscal and monetary policymakers and India’s daily pandemic numbers. The world’s third largest economy is also wrestling with another spike in Covid-19 that is complicating plans for hosting the summer Olympic Games.
Although China Bond Funds extended an inflow streak stretching back exactly a year, there was a loss of momentum on concerns around policy normalisation and the way foreign investors are treated in some impending bankruptcy cases.
“Equity funds have been the main beneficiary of this sentiment shift, recording healthy inflows the past two weeks,” Ioannis Angelakis, Barnaby Martin and Elyas Galou, strategists at BofA Securities, said. “The progressive lifting of economic restrictions, a stronger macro backdrop and rising inflation expectations should benefit beta assets. In this context, higher-yielding beta assets such as HYs should outperform IGs, we think.”
Economic data calendar