European markets and the FTSE 100 gained on Monday with investors expecting inflation in the UK to return to single digits, potentially ending further interest-rate increases.
The FTSE 100 (^FTSE) rose 0.35% to 7,899, while the CAC 40 (^FCHI) in Paris went up 0.19% to 7,534 points. In Germany, the DAX (^GDAXI) gained 0.24% to 15,845.
US and Asia
In Asia, Tokyo’s Nikkei 225 (^N225) rose 0.15% to 28,536 points, while the Hang Seng (^HSI) in Hong Kong was up 1.24% to 20,693. In mainland China, the Shanghai Composite (000001.SS) gained 1.06% to 3,373 points.
Wall Street closed in the red on Friday after key US inflation data showed a less-than-expected rise in prices for March and investors anticipated a peak of rate hikes by the Federal Reserve.
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The Dow Jones (^DJI) closed down 0.42% to 33,886.47 points, while the S&P 500 (^GSPC) fell 0.21% to 4,137.64 points. The tech-heavy NASDAQ (^IXIC) also lost 0.35% to 12,123.47.
Investors are now anticipating more major earnings from the US.
Oil prices
Crude prices edged lower after advancing for a fourth week on signs of a tightening market.
US crude oil, or West Texas Intermediate (CL=F), fell 0.19% to $82.36 (£66.29) a barrel, while Brent crude (BZ=F) also dropped by 0.12% to $86.21 a barrel.
Pound
The pound (GBPUSD=X) gained against the US dollar by 0.04% to 1.24. Against the euro, the sterling (GBPEUR=X) also rose by 0.11% to 1.13.
Economic data
In the UK, prime minister Rishi Sunak is expected to get a boost this week with inflation expected to dip below 10% for the first time since August.
More than half of economists now think the Bank of England (BoE) will refrain from raising its key rate again, according to a Bloomberg News survey.
“Economic data released between now and the Bank of England’s May meeting hold the key to whether the central bank will lift rates again. We think the BoE will have reason to pause but markets disagree, having priced more than an 80% chance of another hike,” Ana Andrad of Bloomberg Economics said.
Tina Teng, analyst at CMC Markets, said China’s better-than-expected trade balance data boosted sentiment in Asian stocks and highlighted how first-quarter GDP figures from the world’s second largest economy will be in the spotlight for investors this week as they navigate its economic trajectory.
Figures will be released on Tuesday, along with industrial production and retail sales data.
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In the UK, the Office for National Statistics will release data on the change in the price of goods and services purchased by consumers in Britain on Wednesday.
“Traders could be interested in this announcement as inflation remains a major concern around the world,” analysts at Ava Trade said.
On Friday, S&P Global will release the German Flash Manufacturing and Services Purchasing Manager’s Index — a diffusion index that is a leading indicator of economic activity. The data could be a leading indicator of whether the German economy is strengthening or weakening.
Netflix and Tesla
US tech companies Tesla (TSLA) and Netflix (NFLX) are set to report earnings this week. Teng said these will be the main market movers to steer investor sentiment this week.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said for Netflix user growth and customer loyalty will be of interest.
“Consumers are under pressure, and discretionary money remains very limited, causing them to cut down. As a result, we may not see as many customers willing to renew their membership. Another element that traders will consider is how the corporation has been able to get more members by pursuing password sharing,” he said.
Teng said: “Despite a record Q4 delivery number, Tesla’s profit margin is in doubt due to its generous price cuts. Also, whether the EV maker can achieve its 2 million delivery number becomes suspicious amid severe Chinese carmaker competition.”
Bank earnings
Investors will also be watching earnings reports from Charles Schwab (SCHW) later on Monday, the Bank of America (BAC) on Tuesday and Morgan Stanley (MS) on Wednesday.
Naeem Aslam, chief investment officer at Zaye Capital Markets, said: “As a number of US banks announce earnings, bank earnings remain a hot topic. Traders will be most interested in how much these banks are lending and how much they are tightening their lending requirements throughout the next few quarters.
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“Remember that interest rates in the United States are at a multi-decade high, and financing isn’t as simple as it once was. Furthermore, these institutions are aware that inflation remains considerably above the Fed’s objective, implying that the Fed is likely to raise interest rates by 25 basis points a couple of times, posing a danger to the US economy,” he said.
This is because rising interest rates are limiting economic growth in the US, Aslam said.
“However, not everyone is pessimistic about the US economy, as the treasury secretary recently said that she continues to forecast modest growth,” he added.
Gold prices
Gold prices (GC=F) also started the week on a high note, as the price remained above the important support level of $2,000 in early Monday trade.
“Traders are focusing on the Federal Reserve’s next monetary policy move while keeping a watch on US economic statistics, which heavily impacts their choice,” Aslam said.
He said the path of least resistance remains tilted to the upward, and noted that traders would prefer a buy-a-dip chance.
Watch: Business Lookahead: It’s earnings season
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