Current market commentary
The traditionally positive April seasonality seems to be showing itself again. Equity markets rose across the board, with US equities in particular making significant gains. In addition to the pause in the rise in bond yields, positive earnings revisions and economic surprises continued to be responsible for this. Latin American earnings estimates for the next 12 months have risen sharply, by more than 8 per cent in the last month alone. However, valuation levels have risen elsewhere, especially in the US, so it remains important that companies at least meet earnings expectations. Accordingly, the upcoming Q1 reporting season will be exciting. Investor sentiment remains optimistic. However, we think a major correction is unlikely in the short term because there is still more than USD 4 trillion of dry powder in US money market funds. Additionally, systematic equity strategies are low on equity exposure, which should limit the depth of any sell-off.
The Q1 reporting season is likely to dominate events in the markets. This week and next, more than 90 of the S&P 500 and several of the Stoxx 600 companies report. Monetary policy will come to the forefront on 22 April, when the ECB meets for its monthly meeting. On Tuesday, industrial production data for the UK and Italy will be released. In addition, the ZEW economic expectations (Apr.) will be announced. On Thursday, US retail sales (Mar.), the Empire State (Apr.) and Philadelphia Fed Index as well as US industrial production (Mar.) will follow. US consumer confidence and Q1 GDP, industrial production (Mar.) and retail sales (Mar.) from China will come at the end of the week. There will also be some inflation data released throughout the week, which the market will be watching closely. The preliminary Markit Purchasing Managers' Indices (Apr.) for the US and the Eurozone will also be published at the end of the following week.