US markets saw another mixed close yesterday, only this time it was the S&P500 and Nasdaq that finished the day lower, while the Dow and Russell 2000 finished higher on the day. Despite the mixed close the S&P500 and Dow still managed to post new record highs.
Coinbase finished its first day of trading, closing at $328, below its opening price of $381, despite peaking at $428 in the first few minutes of trading.
Earlier in the day European markets also saw another mixed session, with the FTSE250 closing at a new record high, and the FTSE100 outperforming on the back of a big rise in basic resource stocks, led by the likes of BP and Royal Dutch Shell, and an oil price that finished 4 per cent higher on the day, after bigger than expected falls in weekly inventories.
“Today’s European open looks set to be a mixed affair following in the footsteps of Asia markets which are being held back by weakness in Chinese markets,” commented Michael Hewson, chief market analyst at CMC Markets UK, this morning.
“At the beginning of the week there was plenty of speculation that a hot reading on US CPI might give added fuel to the inflation bulls, and in doing so give policymakers at the Federal Reserve some food for thought,” he explained.
This was “never really likely” given that the March CPI numbers were always going to be on the high side given that a year ago the US economy was put into lockdown, thus introducing a deflationary shock on prices, which is only now starting to reverse, Hewson continued.
“It will probably need a much more sustained recovery in prices over the next few months before markets become too concerned, however there are still plenty of warning signs in the recent data, due to various supply chain disruptions,” he added.
US retail sales today
Today attention returns to US retail sales for March, as well as the latest weekly jobless claims numbers which have seen a couple of weeks of increases in the headline numbers.
“These increases have run counter to the prevailing narrative of a rapidly recovering labour market, serving to raise eyebrows, however as with any weekly data set it is important not to get too carried away with these sorts of swings.”
“This type of data tends to get revised constantly and as such is likely to swing quite sharply in either direction. Expectations are for a decline from 744k to 700k,” Hewson said.
Away from the weekly jobless claims it is the March retail sales data that is more likely to move the market. In the last 12 months US consumers spending patterns have increasingly been driven by the issuance of stimulus payments.
“We saw it in the first lockdown with the CARES Act economic impact payments of $1,200 per adult, plus $500 per qualifying child, and then again in late December with the payment of an additional $600 per eligible individual,” he noted.
In the ensuing months retail sales surged sharply, by 17.5 per cent in May 2020, and then by 5.3% in January 2021.
Since that January rebound in consumer spending the economic outlook has shifted markedly, helped by a recovering labour market, a surge in consumer confidence, an accelerated vaccine rollout, as well as new stimulus payments of $1,400 per person, that were signed off in March, and which are expected to have a similar effect to the ones we saw in January.
“This renewed optimism is expected to manifest itself in another strong month, with retail sales estimates averaging at around a 5.8% gain, more than reversing the 3 per cent decline in February,” Hewson said.
“There are some who are suggesting that this estimate might be too conservative, and that we could see a number in the region of 10 per cent,” he added.
Given the size of the stimulus payments seen in March, it’s certainly in the realms of possibility, with the only unknown being as to how sustainable the rebound in consumer spending will be, and whether it can extend into Q2, Hewson concluded.