Equities continued a rebound following a steep rout, with gains on Friday helping the S&P500 post its biggest weekly gain since November 2020.
The S&P500 rose +2.47% on Friday, taking its five-day advance to +6.58% with 96% of stocks higher on Friday and all sectors positive, led by consumer discretionary +3.47% and technology +3.44%. The Dow Jones also gained +1.76%, as did the Nasdaq Composite +3.33% and Russell 2000 +2.70% with the VIX down -6.47% to 25.72. Meanwhile, U.S. markets will be closed on Monday for the Memorial Day public holiday.
PCE inflation data showed an easing in price pressures in April in line with estimates with the core measure rising at +4.9% over the prior year compared with +5.2% in March, while the headline index also eased from +6.6% to +6.3%. Consumer sentiment deteriorated further in May to a decade low with escalating concerns over inflation and a dimmer outlook for the economy. The University of Michigan Consumer Sentiment survey for May declined from 65.2 in April to 58.4 in May, missing estimates of 59.1. Ahead for the week, investors will look to the consumer confidence overnight on Tuesday, which is forecast to weaken, the ISM manufacturing PMI for May overnight on Wednesday and rounded off with non-farm payroll data for May on Friday. The average analyst forecast is for +320k jobs to be added during the month, with the unemployment rate edging lower to 3.5% from 3.6%.
European stocks were also higher on Friday, posting their best weekly advance since mid-March with the Euro Stoxx 600 climbing +1.42% on Friday and +2.98% over the week. The DAX also gained +1.62%, as did the CAC +1.64% and FTSE100 +0.27% which benchmarks across the region all higher. Investors will focus on Eurozone consumer confidence data tonight as well as German inflation year-on-year to May forecast to rise to +7.6% from +7.4%. Tuesday will bring German unemployment data along with Eurozone inflation expected to show core prices remained unchanged at +3.5% while headline prices rose to +7.7% from +7.4% over the year. Wednesday will bring German retail sales along with the Eurozone unemployment rate, and Friday will round out the week with PMI surveys as well as Eurozone retail sales.
*Note: These prices are based on futures and/or CFD pricing and may therefore differ slightly from spot pricing.
The ASX looks set for a decisively stronger open this morning with ASX200 futures up +83 points or +1.16% to 7,271. The index gained +1.08% on Friday, pushing higher by +0.52% over the week with materials +1.38% and financials +1.05% doing the heavy lifting on Friday. Ahead for the week, investors will focus on GDP data for Q1 released on Wednesday at 11:30 AEDT, forecast to show the economy expanded at +3% over the year down from +4.2% previously, gaining just +0.7% over the quarter on an annualised basis. However, analysts at NAB are calling for just +0.1% growth over the quarter, noting “A soft print on Wednesday though is of little significance to the outlook, more likely due to capacity constraints and disruptions than any shortfall of demand”. The Australian dollar gained +0.90% on Friday to 0.7162 with the 10-year government bond yield +5.2 basis points higher at 3.255%.
Oil prices finished higher on Friday with both WTI and Brent crude +0.86% and +1.73% higher at US$115.07 and US$119.43. Base metals were mixed for the week with aluminium down -2.53%, along with tin -1.61% and lead -0.05% while copper gained +0.39% with nickel +1.11% and zinc +3.68%. Iron ore futures in Singapore closed +2.71% higher on Friday and are up a further +0.96% in early trade this morning at US$134.35. Gold edged +0.17% higher on Friday to US$1,853.72 along with silver +0.45% to US$22.11 while Bitcoin fell -2.41% on Friday although has partially recovered those losses over the weekend trading at US$29,160.
Economic data:
- Eurozone Consumer Confidence (MoM May) 19:00
- German Inflation (YoY May) 22:30
- Fed Waller Speech 01:00
This article was written by James Woods, Portfolio Manager, Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3632.
