Us Stock Indices Follow Europe Up, Euro Eases
The euro enjoyed a strong spell against the dollar last week, but some of that ground was given back on Monday, as EUR/USD fell 0.37% to 111.57 in early trading.
By Peter Martin
Monday, May 4, 2015
The decline in the shared European currency came despite confirmation that eurozone manufacturing enjoyed a fairly healthy month of April. The manufacturing PMI for the eurozone rose a touch to 52.0 for April, revised up from the preliminary reading of 51.9. Though this suggests growth in the sector was slightly slower in April than in March, that was a tough comparison, as March marked a 10-month high and digging below the headline level there were a number of areas of encouragement, not least a fifth consecutive increase in new orders, a second straight month of rising input costs and the first increase in factory gate prices in more than a year and a half, which should help to ease deflationary concerns for the region.
The weakening of the euro alongside the expansionary manufacturing data helped lift European stocks: the German DAX rose 1.47% to 11,622 and the French CAC 40 climbed 1.09% to 5101.5. The UK stock market is closed on Monday because of the traditional May Day public holiday.
Manufacturing data released over the weekend for China told a different story though, showing an increase in the pace of contraction for the sector in April as domestic demand dwindled. China’s manufacturing PMI had fallen below the 50 mark that separates contraction from expansion in March with a reading of 49.6, and things worsened last month: the index slid to 48.9, with new orders decelerating by the most in a year, employment levels falling and falls in prices (both input and output). China’s central bank has taken action previously to try and stimulate its economy and the weakness in this manufacturing report will increase expectations for further measures to try and prevent a hard landing.
Corporate earnings will continue to be in focus this week. Comcast ($CMCSA), the largest cable operator in the US reported better-than-expected earnings pre-market on Monday and announced the amount of cash assigned for its stock buyback this program in 2015 is now $6.75 billion, up substantially from the previously-allocated $4.25 billion. Shares in Comcast rose 1.0% in early trading. Entertainment giant Disney ($DIS) reports on Tuesday, hot on the heels of the North American release of the latest blockbuster from its Marvel stable, Avengers: Age of Ultron, which set the second-biggest box office opening weekend in history (the first and third spots are also held by Disney/Marvel releases). Disney shares were 0.5% higher shortly after the opening, showing slightly more upward momentum than the wider market. The leading US stock indices enjoyed a positive start on Monday and shortly after the open, the Dow Jones was up 62 points or 0.35% at 18,086, while the S&P 500 Index gained 0.42% to 2117.2.
Attention is likely to switch back to the macro-economy by the end of week, when we get to see the always-eagerly-anticipated monthly Employment Situation report. March’s non-farm payrolls came in woefully low at 126,000 and the key issue will be whether that was just a blip or not. Market expectations point to a bounce back in April, with a consensus estimate of 220,000, while the unemployment rate is expected to improve from 5.5% to 5.4%.
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