Stocks Jumps On Fresh China, Earnings Optimism As Volatility Disappears
(the PBOC printed up moar yan last night and everyone 'decided' to sell gold)
Despite no reports of "China trade deal optimism" overnight, global markets are a sea of green this morning on optimism this time about China's economy itself, which is set to report its GDP tomorrow, coupled with renewed confidence that the equity rally will be supported by stronger than expected corporate earnings. The dollar edged up while Treasuries fluctuated around unchanged.
The MSCI world equity index, which tracks shares in 47 countries, edged up 0.1 percent in early European trade. Europe's Stoxx 600 Index rose for a fifth day, now within inches of 8 month highs, driven higher by banks and retail shares. Germany’s DAX gained over half a percent, while Britain’s FTSE 100 also strengthened. The recent rally comes as a blanket of calm has descended across financial markets, with European stock volatility falling to its lowest since January 2018.
Across the Atlantic, S&P 500 futures pointed to a sharply higher open, one which puts the S&P's all time high within reach as better than expected earnings coming from both Bank of America and BlackRock. In Asia, shares in China and Hong Kong outperformed markets in Japan and South Korea. Emerging-market stocks climbed, though the currencies weakened. The yen inched higher.
While there was no immediate catalyst for the overnight optimism, Bloomberg notes that investors are spending the holiday-shortened week "assessing the chances that stocks will sustain their rally even as similar gains in investment-grade bonds have ebbed since late March. Optimism over earnings appears to be boosting bullish sentiment in equities, though volumes this week have been muted."
Natixis Cross Asset Strategist Florent Pochon echoes this take, saying that investors were mainly focused on U.S. earnings, especially after the first flurry of bank results made for mixed reading: “After the strong rally we have seen in equities, people are now waiting for the next catalyst,” Pochan said. “We do expect some more positive data from Europe which should give a bit of fresh air (to European assets)”
All eyes are now on a slew of Chinese data due on Wednesday, including industrial production and retail sales data but most important will be the latest quarterly GDP data which is expected to post another decline to 6.3% Y/Y. After a worrying start to the year, Chinese data have been more positive as authorities ramped up stimulus measures, soothing investor fears about a slowdown in the world’s second-biggest economy.
“The outlook for Asia critically hinges on the outlook of China’s growth and the ongoing U.S.-China trade talks,” wrote strategists at Bank of America Merrill Lynch. “On both fronts, policymakers and investors believe that the outcome of these two issues is turning more positive.”
Market Snapshot
S&P 500 futures up 0.3% to 2,918.25
STOXX Europe 600 up 0.3% to 389.38
MXAP up 0.3% to 163.45
MXAPJ up 0.4% to 544.55
Nikkei up 0.2% to 22,221.66
Topix down 0.09% to 1,626.46
Hang Seng Index up 1.1% to 30,129.87
Shanghai Composite up 2.4% to 3,253.60
Sensex up 1.1% to 39,326.02
Australia S&P/ASX 200 up 0.4% to 6,277.45
Kospi up 0.3% to 2,248.63
German 10Y yield rose 1.0 bps to 0.066%
Euro up 0.04% to $1.1309
Brent Futures down 0.5% to $70.83/bbl
Italian 10Y yield rose 3.6 bps to 2.207%
Spanish 10Y yield rose 1.3 bps to 1.097%
Brent Futures down 0.5% to $70.83/bbl
Gold spot down 0.3% to $1,284.72
U.S. Dollar Index down 0.03% to 96.91
US Event Calendar
9:15am: Industrial Production MoM, est. 0.2%, prior 0.1%
9:15am: Manufacturing (SIC) Production,
est. 0.1%, prior -0.4%; Capacity Utilization,
est. 79.15%, prior 78.2%
10am: NAHB Housing Market Index, est. 63,
prior 62
https://www.zerohedge.com/news/2019-04-16/stocks-jumps-fresh-china-earnings-optimism-volatility-disappears
https://www.bloomberg.com/markets/stocks/futures
https://www.kitco.com/charts/livegold.html
https://www.dailyfx.com/crude-oil