A huge week for global equities. Major indexes finished the week with outsized gains, thanks to midweek signs of progress in trade negotiations between the U.S. and China and a very strong March jobs report from the Labor Department on Friday. March nonfarm payrolls rebounded, increasing 196K following an upwardly revised 33K gain in prior month, ahead of 175K consensus. The unemployment rate held at 3.8%, as expected.
All major markets gained, with China (+8.89%), Germany’s DAX (+4.05%) and Hong Kong (+3.91%) the standouts. ASX 200 gets the wooden spoon award - up only +0.01%!
Weekly returns to 5 April 2019
(AUD 5-day return far right- hand column)
- 10-Year Treasury yield: +10bp to 2.50%
- Gold: +0.2% to $1,295.8/oz
- Natural gas: +0.6% to 2.678
- WTI crude oil: +5.2% to $63.27/bbl
- AUD/USD: +0.13% to 71.05
Notable company news
Daimler (ETR: DAI) acquires majority stake in Torc Robotics to accelerate autonomous truck development
Daimler is also betting big on autonomous trucks, announcing that its trucking division is buying a majority stake in self-driving vehicle company Torc Robotics. Terms of the deal were not disclosed.
According to the company in its press release “Torc is not a startup, but one of the world’s most experienced companies for vehicle automation,” noted Roger Nielsen, CEO of Daimler Trucks North America (DTNA). “Torc takes a practical approach to commercialisation and offers advanced, road-ready technology, plus years of experience in heavy vehicles.”
Mercedes Benz “Future Truck 2025”
The week ahead
We have a relatively normal economic calendar with inflation data (CPI / PPI) in focus.
The first-quarter earnings reporting season begins later this week with results from U.S. mega banks JPMorgan Chase (NYSE: JPM) and Wells Fargo (NYSE: WFC). Analysts project S&P 500 profits in the first quarter will actually contract 4.2% from a year earlier, followed by +6.3% in the second quarter. The year-on-year earnings growth numbers are complicated by extremely difficult comparison with last year when tax cuts allowed S&P 500 companies to grow profits by some 20%, one of the best growth rates since the financial crisis. Investors need to not focus on year over year measures but concentrate on individual company reports - particularly guidance for subsequent quarters.
Charts of the week
1. It’s Not Just China’s PMI (Purchasing Managers Index) that’s looking up - it’s all export oriented Asian economies as well.
2. And Europe’s service sector as well….
So maybe the global economy is doing better than we think? Global growth concerns are probably overdone given some better services PMIs last week. China’s Caixin services PMI increased to 54.4 in March, its highest since January 2018, from a four-month low of 51.1 in February. Stronger demand, new state policies and improved access to financing cited (Reuters). Follows recovery in both official and Caixin manufacturing PMIs and of course Eurozone services PMI pushed up to 53.3 in final March reading from 52.8 in February.
3. Unlike the first 3 quarters of 2018 the S&P 500 has broadened out nicely with more stocks / sectors participating and providing the majority of the index’s return YTD.
That’s positive for the U.S. equity market.
3. Dow since inception: On its way to 40,000?
4. Liquidity Matters
It’s not just better economic data that’s driving markets…