1. China’s Economy Shows Signs Of Life
The Chinese economy has finally found its pulse after months of slowdown with the recent rally in stocks and commodities boosting investor confidence across the region. Well, it’s about time!
Key sectors of the Chinese stock market surged for a second time this week, boosted by the central bank’s monetary easing and dissipating trade war volatility, bringing an air of confidence back into Asian markets. The Chinese CSI 300 has bumped up 6.62% in the last week, aided by a softening Yuan, but is this enough to offset the damage done to its economy in 2018?
Arguably not. China still has some work to do to get itself out of the woods. While a stock rally may do wonders for investor confidence, the persistent issues of slowing global growth and weaker trade volumes remain a threat to its primarily export-led growth strategy. Moreover, The US’ movements to limit China’s ability to prop up its exports through currency devaluations will undoubtedly be another major spanner in the works for Asia’s powerhouse!
Even though we’re starting to see the effects of fiscal and monetary stimulus beginning to filter through into the economy, the real effects are still yet to come. The next few months will be important for China to reassert its economic presence with stronger internal and external economic data to convince investors of a full domestic and international performance turnaround.
China’s stock market may have rallied almost 20% since the start of 2019, but its momentum will ultimately depend on the effects of stimulus and the consistency and quality of future data once the trade war euphoria wears off. Only time will tell.
2. Fed Committed To ‘Patient’ Outlook
No big surprises out of the Fed this week as Jerome Powell reiterated his flexible, but mainly dovish, approach to monetary policy going forward.
The key takeaways from Powell’s speech were that while the US economy is in strong fundamental shape, the Fed is in ‘no rush’ to hike rates any time soon. The global market outlook beyond the US is sending out signs of slowing growth momentum and the Fed is conscious of truncating the 2019 recovery in emerging markets so soon.
This, along with slowing inflation and normalising the country’s balance sheet represent some of the issues facing the Fed in 2019, to which finding a balance may be a challenging task to say the least. In the near-term, investors have generally priced in no more rate hikes for the next four – six months, give or take.
This dovish sentiment showed up in the currency and fixed income markets where the Dollar index dropped to a 3 week low, while the US 10 year yield erased gains made during Tuesday’s session to revisit a key level at 2.62%.
The softer stance from the Fed will undoubtedly help buoy US and global equity prices, while the Dollar may consolidate slightly. Overall, markets are enjoying the breathing room given to them by the Fed. Good on you, Mr. Powell…Long may it last!
Today we are watching…
1. Alteryx (#ayx)
Analysts are upbeat ahead of tech firm Alteryx’s earnings call later today. The company has experienced a solid uptick in new customer intakes and a dramatic expansion of its international footprint in both Europe, Australia and Latin America. However, despite its recent growth and having won multiple accolades of late, the company does have a number of expense increases expected to hurt profit margin expansion in 2019. Analysts are banking on an earnings beat after hours today, so keep this one in your watchlist!
2. Sempra Energy (#sempr)
Sempra is looking in top shape ahead of its earnings announcement today, thanks to favourable weather conditions and a number of smart acquisitions and divestures. The company experienced higher demand for its services and completed $1.6bn worth of sales for its solar and battery storage assets which will likely show up on its cash flow statement ahead of today’s report. Analysts are expecting Sempra to post solid results today. So keep an eye on this one!