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.

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