The Focus Will Be on Labor Market Data in the US
NEW YORK – April 2, 2019
Last week, the world stock indices showed positive dynamics at the end of the trading week. For example, in the US, the Dow Jones blue chip index rose by 1.67% over the week, the Standard & Poor's 500 broad market index increased by 1.21%, and the Nasdaq Composite high-tech industry indicator rose by 1.13%; Germany's stock market increased by 1.42%.
During the last trading week, optimism prevailed in world markets, in particular, after the news that the next round of negotiations on tariffs for the import of goods between the US and China was successful, as confirmed by Donald Trump. Nevertheless, the US released data on the final US GDP, which in the fourth quarter grew by 2.2%, while the preliminary estimate was 2.6%, while many analysts expected a 2.4% growth rate. It is worth noting that the revision of the estimate of the GDP indicator with a decrease reflects a reduction in the dynamics of consumer spending and business investment compared with preliminary data.
Thus, the estimate of growth in consumer spending, which accounts for more than two-thirds of US GDP, was reduced to 2.5% from 2.8%, business investment — to 3.7% from 4.6%. In addition, it became known that personal income in February grew only by 0.2% against the forecast of + 0.3%, while personal expenses of US citizens rose by 0.1%, although analysts had expected an increase of 0.3%. In addition, last week there were a number of speeches by representatives of the Fed, and all of them reported that at the moment the current monetary policy is optimal in accordance with the state of the country's economy.
In China, the index of business activity in the NBS industry was released, which in March was 50.5 points compared with 49.2 points in February. It is also worth noting that the index of economic sentiment in the eurozone in March dropped to 105.5 points from 106.2 points a month earlier. At the same time, the indicator decreased for the ninth month in a row, and the March value was the lowest since October 2016.
This week, market participants should follow the release of data on the US labor market. According to expectations, in March, employment in the non-agricultural sector increased by 170,000, while the unemployment rate was 3.8%. In addition, the average working week and hourly wages for March will be announced. We believe that even if the released data is better than expected, this is unlikely to greatly affect the likelihood of interest rate increase at the next Fed meetings. In addition, retail sales will be published in the US, as well as February durable goods orders.
In the UK, the fourth attempt to vote on the country's withdrawal from the EU could take place. In China, the indices of business activity in the industry and the service sector from Caixin for March will be announced. At the same time, the Eurozone and Germany will publish the indices of business activity in the industry and services sector for March. In addition, there will be speeches by a number of Fed representatives, namely Raphael Bostik, Neel Kashkari, John Williams and Loretta Mester. Investors are gradually starting to prepare for the reporting period for the first quarter. Note that 79 companies lowered their profit forecast for the first quarter of 2019, with analysts expecting a decline in earnings per share by 3.9% compared with 3.6% a week earlier. From a technical point of view, on the daily chart, the S & P 500 index continues to trade in the upward wedge with the lower limit around 2800 points. The upper limit tends to 2850 points. Stochastic lines are in a favorable position for buying and still far from overbought, therefore testing of the upper wedge boundary is allowed.
The German DAX index is still trading within the rising wedge. In this case, the closest resistance level is the mark of 11950 points. Stochastic lines are in a favorable position for buying, but have already reached the overbought zone, therefore the growth potential is already limited.