United States
Upbeat Chinese trade data and ongoing hopes for economic reopening lifted equities Thursday. The Dow industrials gained 0.9 percent, the S&P 500 gained 1.2 percent, and the NASDAQ was up 1.4 percent.
Risk assets reacted favorably to an easing in US-China trade tensions on news that high-level US-China talks would resume next week on implementing the phase-one trade deal. Earlier, markets took fright when President Trump threatened to cancel the trade deal.
Among sectors, financials and energy led gainers, with health care and consumer staples lagging. Strength in asset managers boosted financials. Materials and industrials were strong, with airlines rebounding.
Among companies in the news, Lyft, the ride-sharing company, jumped 22 percent as its quarterly revenues beat expectations. Ameriprise, the asset manager, rose 13 percent on strong fee revenues and plans to boost dividends. Fox, the media giant, rose 1.6 percent on a big gain in revenues, including a strong showing at Fox News. Paypal, the online financial transactions business, rallied 14 percent after raising its quarterly guidance. Peloton, the home exercise business, jumped 16 percent on a big earnings and revenues beat and higher guidance.
In US economic data, initial jobless claims, down 677,000 in the May 2 week, fell for a fifth straight week, but the very bad news is the level: 3.169 million which was roughly at Econoday's consensus of 3.041 million. The 4-week average also fell, down 1.005 million to a still very staggering 4.174 million. More bad news comes from continuing claims which, in lagging data for the April 18 week, soared 4.636 million to 22.647 million. The unemployment rate for insured workers, again in data for the April 18 week, rose 3.1 percentage points to 15.5 percent.
These data reflect observations at 4:00 PM US ET: Dated Brent spot crude oil fell by 73 cents to US$29.11, while spot gold rose US$25.10 to US$1,715.24. The US dollar was mostly weaker against major currencies, but up vs. the yen. The US Treasury 30-year bond yield fell 7 basis points to 1.33 percent while the 10-year note yield fell 7 basis points to 0.64 percent.
Europe
Rising commodities prices after surprisingly positive Chinese trade data lifted equities Thursday, with energy and miners leading. The Europe-wide STOXX 600 rose 1.1 percent, the German DAX gained 1.4 percent, the French CAC rose 1.5 percent, and the UK FTSE-100 rose 1.4 percent.
Among sectors, retail, basic resources, financial services, real estate, media, banks, oil & gas outperformed, while lagging were health care, autos, telecom, and utilities.
Among companies in focus, Arcelor Mittal, the French steel manufacturer, rose 7 percent after an earnings beat. Anglo American, the big UK miner, was up 7 percent, and Royal Dutch Shell rose 2.7 percent as oil prices extended recent gains. On the downside, Air France fell 2.5 percent after projecting continued bleak conditions through the quarter.
In economic data, German industrial production plunged in March as the early effects of the coronavirus started to bite. Output declined a record 9.2 percent on the month, exceeding expectations and cutting annual growth to minus 1.8 percent. Separately, the Bank of England kept rates unchanged at its policy meeting but warned of a dramatic recession with real GDP dropping 3 percent in the first quarter before collapsing 25 percent in the second. Markets understood that the BOE may boost its asset purchases soon.
Asia Pacific
Major Asian markets generally closed little changed Thursday, with trading in some parts of the region still closed for holiday. Hong Kong's Hang Seng index was one of the biggest movers, down 0.7 percent, while the Shanghai Composite index and Australia's All Ordinaries index fell 0.2 percent and 0.3 percent respectively. Japan's Nikkei and Topix indices closed up 0.3 percent and down 0.3 percent respectively.
China's trade surplus widened from US$19.9 billion in March to $45.3 billion in April. Exports rose 3.5 percent on the year in April, rebounding from a fall of 6.6 percent in March, with the headline number reflecting solid growth in exports to Japan and elsewhere in the region, a smaller year-on-year drop in exports to the European Union, but weaker demand from the US. Imports fell 14.2 percent after dropping 0.9 percent previously, with this weakness broad-based across major trading partners and partly driven by lower commodity prices and currency depreciation.
Also published Thursday, the Markit China PMI survey's business activity index for the services sector rose from 43.0 in March to 44.4 in April, indicating that activity in the sector contracted further but at a slightly slower pace than previously. Respondents reported a smaller fall in new orders but a bigger drop in new export orders, a survey-record decline in employment, and a fall in selling prices. With the manufacturing PMI survey, published last week, showing a small drop in its headline index from 50.1 to 49.4, together these resulted in the composite index rising from 46.7 in March to 47.6 in April.
Australia's trade surplus widened from A$3.865 billion in February to A$10.602 billion in March, a record high. Exports rose 15.1 percent on the month in March, up sharply from a revised drop of 6.9 percent in February, with rural and non-rural goods both rebounding from previous declines. Iron ore exports, in particular, recorded strong growth in both volume and value terms in March, while a spike in exports of non-monetary gold also made a significant contribution to headline growth, outweighing weakness in services exports. Imports fell 3.6 percent on the month in March after declining 4.6 percent in February, with slight increases in imports of consumption goods and intermediate and other merchandise goods outweighed by bigger declines in imports of capital goods and services.
Looking ahead*
On Friday in Asia/Pacific, Japanese household spending and PMI composite reports are scheduled, plus the Reserve Bank of Australia statement on policy. In Europe, the German merchandise trade report is due. In North America, the following are scheduled: Canadian labor force survey, and in the US, the employment situation.
