World shares are beginning the week in much the same way they ended the one before. All markets remain in the shadow of a dollar that so far shows little inclination of relinquishing almost three-month highs. The greenback and hence dollar-denominated yields continue to keep appetite for shares in check even as encouraging events in the Korean peninsula and a persistent strain of solid earnings keep buyers close by.
One variation, on Monday though is that U.S. stock market futures rose in unison with large Asia-Pacific markets—at least those that were open whilst Japanese, Indian and Chinese benchmarks were closed due to holidays. Positive Asia-Pacific closes and European and U.S. early trade point to a more sure-footed Wall Street session than those seen of late. Plus, with almost 80% of S&P 500 companies that have reported earnings so far (about half) beating forecasts, investors had further reason to put aside misgivings and hunt out potential value among stock markets still below earlier-2018 peaks. On the U.S. earnings Front, Apple, which reports earnings on Tuesday, will be a key pivot, providing further upside momentum if it confounds expectations of ebbing iPhone demand and slowing profit and revenue growth.
In Europe, high profile M&A and earnings buffed stock market sentiment further as investors opted for an optimistic view of the deal between Sainsbury’s and Asda to create Britain’s largest supermarket. Sainsbury’s also reported a narrow rise in annual underlying earnings, representing a late return to profit growth compared to the 28% annual profit rise Tesco reported and an 11% advance by Morrisons. The disparity in profits and growth, on which Sainsbury’s is again the laggard combined with potential snags to the deal, like scrutiny from competition regulators, could put a cap on Sainsbury’s stock in the weeks ahead, after they rose 20% in early dealing on Monday.
A heavy macroeconomic slate will also be in view for investors this week, with U.S. monthly jobs data on Friday, as usual, the key release to watch. On Monday afternoon, supposedly the Fed’s preferred inflation gauge, the personal consumption expenditure index will be updated. The ‘core’ reading is meant to provide amongst the purest assessments of inflation growth and is forecast to rise 0.2% over the month of March, as it did in February. Markets—particularly the dollar and Treasury yields—may well react to the reading if it surpasses consensus forecasts. However, it will have little bearing on the Federal Reserve interest rate decision scheduled for Wednesday. The protocol that dictates interest rate policy changes seldom take place when the Fed chair has not scheduled a press conference, almost certainly applies this week. In fact, the interesting points in this week’s Fed meeting are likelier to be revealed when minutes are released in a couple of weeks, than in the accompanying statement. The FOMC will almost certainly make few further alterations to its group thinking having tightened policy just weeks ago.