Baba Stock – MORNING BID-“Inflection point” for markets too
A look at the day ahead from Sujata Rao.
It will be an eventful week not least in the United States where U.S. Congress debates a $2 trillion infrastructure bill, inflation plus retail sales data will be released, banks report Q1 earnings and $96 billion of three- and 10-year notes will be auctioned on Monday. “An inflection point”, Fed chairman Powell dubbed it in a weekend interview.
Newsflow was hectic over the weekend too after China slapped New-York-listed e-commerce giant Alibaba with a record $2.75 billion fine. Expect more of the same as Beijing bulks up resources to crack down on anti-competitive behaviour.
Alibaba shares shrugged off the fine to rally in Hong Kong but Chinese equities fell almost 1%, leading Asian shares lower. European and U.S. futures are down, so are bond yields.
In contrast to signs of a strong global growth pick-up and robust company earnings, the virus newsflow remains worrying.
India has surpassed Brazil in terms of infection numbers and Germany removed powers from its “Länder” in order to more easily impose activity curbs on regions with high numbers of infections. Monthly damage to Germany’s economy may run at 10 billion euros, Commerzbank estimates.
U.S. Treasury yields meanwhile stand more than 10 bps off recent highs. They have eased in recent days, despite a blowout March payrolls report and the largest annual producer prices gain in 9-1/2 years.
If dovish Fed assurances have indeed sunk in, it could mean a turning point for the dollar which has lost 1% in April following a 3.6% gain in Q1.
Key developments that should provide more direction to markets on Monday:
– UK retail opens up as lockdown eases.
-Bavarian premier Markus Soeder will run as a candidate for German chancellor in September elections.
-Russian foreign minister Lavrov in Egypt.
-Euro zone retail sales data due.
-CEOs of almost 20 major companies including General Motors , Ford Motor and Taiwan Semiconductor to attend White House summit on semiconductor shortages.
-Companies: Microsoft is in talks to buy AI business Nuance Communications for about $16 billion; UK shopping centre operator Hammerson may sell retail parks portfolio to Canadian private equity firm Brookfield: UK cyber security firm Darktrace to float in London.
-Ibero-American banking conference with governors of Bank of Spain and Bank of Portugal.
– Far-left candidate Pedro Castillo faces conservative Keiko Fujimori in a June run-off of Peru’s presidential election; In Ecuador, banker Guillermo Lasso unexpectedly won a presidential election.
(Reporting by Sujata Rao; editing by Dhara Ranasinghe)
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