April 7 – A look at the day ahead from Danilo Masoni.
After European stocks recovered to pre-pandemic levels in a record-breaking session and Wall Street closed near all-time highs, markets appear to be able to pause today, though it doesn’t look like anything have to stop the party.
Japanese household confidence at an eight-year high is the latest sign that the pain of the pandemic is healing, as ECB politician Pierre Wunsch said the eurozone is on the verge of a boom of consumption for five years once households can spend freely again.
Citi’s economic surprise indices for Europe, the United States and the G10 countries have been in positive territory for at least nine months, while the first-quarter corporate reporting season that begins later this month is expected to show European and US profits up 47% and 24% respectively.
Unsurprisingly, the term “merger” reappears in market commentaries. UBS wealth managers tell investors that they should “not be afraid to enter the market at record levels”. Deutsche Bank strikes a dissenting note, forecasting a “consolidation” of 6-10% of the shares.
That said, European and US stocks could remain muted after Tuesday’s dynamic session, although Asian stocks hit a three-week high. The dollar, meanwhile, softened to a two-week low as Treasury yields slipped further from recent highs.
The focus of attention is March’s services and Europe’s composite PMIs as well as the US Federal Reserve’s March meeting minutes.
On the corporate front, mergers and acquisitions remain in the headlines. Shares of electricity group EDF could rise 10% after sources said the French government could spend around € 10 billion to buy out minority shareholders.
Toshiba climbed 18% after saying it was considering a $ 20 billion bid from private equity firm CVC Capital Partners.
Finally, Deliveroo is on the radar as retail investors can start trading the stock today, a week after its dismal IPO. Stocks can open up to 3% less.
Key developments that should give more direction to the markets on Wednesday:
* Final PMI
* China’s foreign exchange reserve in March
* Samsung Electronics said first quarter profit likely increased 44%
* IMF Managing Director Georgieva and World Bank President Malpass speak at IMF and World Bank Spring Meetings
* German 5-year bond auction
* 5 year and 25 year gilding auctions in the UK
* The Reserve Bank of India kept interest rates stable
* National Bank of Poland, Bank of Thailand meetings
* St. Louis Fed Chairman James Bullard speaks at 3:00 p.m. GMT
* US goods trade balance in February / consumer credit
Reporting by Danilo Masoni; edited by Sujata Rao