News Column

MARKET COMMENT: US Stocks To Test All-Time Highs Again, Data In Focus

June 2, 2014

Jon Darby

LONDON (Alliance News) - Futures trading indicates that US stocks will follow major markets in Asia and the UK higher Monday, reacting positively to data showing a five-month high in Chinese manufacturing growth.

The S&P 500 made fresh all-time highs every day last week, closing on Friday at 1,923.57, while the DJIA also closed marginally higher on Friday and sits near to its recent all-time high.

Futures trading indicates that both markets will test those highs again Monday, with the S&P 500 set to open about 1 point higher and the DJIA about 16 points higher.

"US markets look set to take their lead higher from stocks in Asia today which got a boost from the better than expected China PMI numbers over the weekend," said CMC Markets market analyst Jasper Lawler.

Major European markets have put in a more mixed performance so far Monday following a disappointing round of revisions to the Markit manufacturing PMI's for May. The prints were broadly revised a little lower, with the exception of France which was increased slightly. It's the French stock market that is underperforming however, as the PMI confirmed the sector slipped back into contraction over the month.

Heading towards the Wall Street open, the French CAC 40 trades near to flat, while the German DAX is up 0.2%.

There's still some key data to come ahead of the US open in the form of German consumer price inflation at 1300 BST. Economists expect consumer prices to have risen by 0.2% in May, reversing the 0.2% drop recorded in April. Core prices, the measure more closely watched by the European Central Bank, are expected to be rising at just 0.1%, after falling by 0.3% in April.

Following months of low, and even negative, inflation readings, the market has been increasingly pricing in a rate cut by the ECB at this Thursday's policy meeting since President Mario Draghi said after the the last meeting that the governing council was, "comfortable with acting next time". Since then, the euro has fallen almost 3.0% against the dollar from a high of USD1.40 to currently trade just above USD1.36.

"A ten basis point cut in both the refinancing and deposit rates is universally expected this week," said Societe Generale currency strategist Kit Jukes.

Also ahead of the Wall Street opening bell, US treasury secretary Jack Lew gives a speech at 1240 BST.

After the markets have opened, the US Markit manufacturing PMI for May is released at 1445 BST. Economists are expecting a slight pick up in activity and a reading of 55.5, up from 55.4 in April. The ISM manufacturing PMI is expected to echo that sentiment and record a rise to 55.4 in May from 54.9 in April.

US stock markets have managed to make new highs despite disappointing company earnings and weak macro data, as the market has broadly written off the disappointing first-quarter as the effect of the extraordinary winter weather.

Investors will now look for a pick up in macro data, including in construction spending, which is expected to have expanded by 0.6% month-on-month in April, up from 0.2% in March, when the numbers are released at 1500 BST.

Apple will likely be in focus later, with many expecting the technology giant to unveil some new software at its Worldwide Development Conference in San Francisco Monday. The company traditionally unveils new products at the event.

US Doughnut maker Krispy Creme is due to release its first-quarter numbers, with earnings per share of USD0.23 on revenue of USD126.68 million expected.

In the UK, the FTSE 100 is holding on to morning gains, boosted by the mining stocks on the back of the improving Chinese manufacturing picture. Ahead of the Wall Street open, the FTSE 100 is up 0.3% at 6,865.58, and the FTSE 250 is up 0.4% at 16,083.26, while the AIM All-Share continues to underperform, down 0.1% at 814.50.

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Source: Alliance News

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