Earnings results and macroeconomic data are likely to overshadowed geopolitical tensions
Thursday night’s cruise missile attack on a Syrian airport appeared to be the catalyst for early morning volatility on Wall Street. The Dow started in negative territory, but worked its way into a positive position during early afternoon trading.
The potential negative fallout from the attack appeared to be offset by the fact that it was a show of assertive action with the circumstances justified and the response proportionate.
However, subsequent commentary and action by Russia, as well as a heightening of tensions with North Korea could see US investors less dismissive of President Trump’s actions this week, and indeed more cautionary with their investment strategies.
Some analysts are suggesting gold could come back into play. It has remained resilient above the US$1250 per ounce mark over the last fortnight without showing signs of revisiting the US$1300 per ounce levels that were last seen in November.
In terms of the week ahead, the focus is likely to be squarely on some numbers that emerged in the US on Friday and important earnings results that will be a guide as to how the economy is really performing, stripping out the political hype that has been a key driver for most of the reporting period.
Reality bites as worst jobs data for nearly 12 months is released
There was a sign on Friday that the economy isn’t performing as well as the stock market would suggest. Only 98,000 new jobs were created in March in the US, the smallest gain in nearly a year. Not only is this data an indicator of business confidence, but it also is a barometer of forward household disposable income.
Not surprisingly, the release of this data saw the Dow lose all of the day’s gains plus some in the last two hours of trading. The close of 20,656 points was only six points lower than the previous day’s close, but more importantly it was more 70 points lower than where the index peaked at about 2 PM.
The NASDAQ was relatively flat, but it also responded negatively to the jobs data.
European stocks showed little reaction to geopolitical issues, and in fact the FTSE 100’s gain of circa 0.6% was partly supported by the strong share price performances from defence contractors.
The DAX was relatively flat, closing at 12,225 points. The Paris CAC 40 gained 0.3% to close at 5135 points.
On the commodities front, oil continued its strong run, increasing from the previous day’s close of US$51.70 per barrel to hit a high of US$52.88 per barrel in the first hour of trading, fuelled to some extent by the prospect of tightening supply from the oil-rich Middle East region should military activity escalate.
Iron ore was savaged, falling 6.8% to circa US$75 per tonne.
Base metals were mixed with copper making a slight gain, nickel increasing more than 1% and zinc and lead continuing their decline which now sees the two metals trading in the vicinity of their one month lows.
Zinc has been particularly hard hit over the last fortnight falling from US$1.28 per pound to close at US$1.21 per pound on Friday. By comparison, lead has fallen from US$1.06 per pound to end the week at US$1.02 per pound.
Nickel’s gain saw it close in the vicinity of US$4.60 per pound, and technical analysts could see a break above US$4.65 per pound as important given that it was around this level that the metal found a base after plunging from US$5.00 per pound in early March.
The Australian dollar continued to weaken against the US dollar, falling below the psychological US$0.75 level.
This article is General Information and contains only some information about some elements of one or more financial products. It may contain; (1) broker projections and price targets that are only estimates and may not be met, (2) historical data in terms of earnings performance and/or share trading patterns that should not be used as the basis for an investment as they may or may not be replicated. Those considering engaging with any financial product mentioned in this article should always seek independent financial advice from a licensed financial advisor before making any financial decisions.
When the experts at Next Investors have a stock pick, it may pay to listen.
The Next Investors have been investing in ASX small cap stocks for years, with their best small cap picks yielding returns of 1,200%, 1,120%, 900% and 678%.
They have just revealed their hand-picked, FY2021 stock portfolio of high conviction long-term investments.
Click the link below to see what they are currently investing in.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.