Monday 09:35 BST
What you need to know
● Equities starting second quarter on the front foot
● S&P 500 futures just 1.5 per cent off record and Euro Stoxx up 0.4 per cent
● Investors keeping a watch on national manufacturing surveys
● Dollar little changed against peers and South African rand continues to slide
● Brent and WTI crude hold above $50 a barrel, while gold soft
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Hot topic
Equity investors are starting the second quarter in a mildly bullish mood and hoping a flurry of business surveys at the beginning of the month will back up the market’s positive bias.
The FTSE All-World stock index rose 6.4 per cent in the first three months of 2017 — its best start to a year since 2012 — helped by a 5.5 per cent rally for Wall Street as optimism about the global economy dovetailed with hopes the Trump presidency could boost US growth.
Monday brings a range of national manufacturing reports that may help set the tone for the next few sessions.
A closely watched survey from the Bank of Japan pointed to stable growth for the country’s large manufacturers. The central bank’s Tankan survey also showed a mild improvement in conditions among medium- and small-sized enterprises.
In China, the Caixin/Markit manufacturing purchasing managers’ index (PMI) fell from 51.7 in February to 51.2 in March, but still logged a ninth successive month of expansion for the sector. Mainland China’s markets were closed for a holiday on Monday.
The eurozone PMI showed the bloc’s economy continued to improve, with the factory activity index hitting 56.2 in March, its best level in six years. Manufacturing in the UK continues to expand too, though the PMI reading of 54.2 was drown slightly from the previous month.
PMIs are due later for the eurozone and UK, while the US ISM manufacturing index is set to be published at 15:00 BST.
Equities
US index futures suggest the S&P 500 will gain 2 points to 2,365, leaving the Wall Street benchmark just 31 points below its record closing high touched a month ago.
Investors will now start looking ahead to the first-quarter corporate earnings season, wary that profit growth will need to justify the stock market’s recent rally.
“Valuation concerns are persisting in the US, with the S&P trading on a forward PE multiple of 18 times ahead of the Q1 reporting season, where the consensus expects index earnings per share growth of around +10 per cent year on year,” said Ian Williams, strategist at Peel Hunt,
“The trade-off between valuations and positive earnings momentum appears less stretched in the European markets,” he added.
And Europe is also starting the month in chipper mood. The Stoxx 600 is adding 0.2 per cent as commodity and financials stocks lead the way.
In Asia, Japan’s benchmark Topix rose 0.3 per cent, while Australia’s S&P/ASX 200 inched up 0.1 per cent and Hong Kong’s Hang Seng gained 0.5 per cent. South Korea’s Kospi shrugged off comments by President Trump regarding Pyongyang, the index adding 0.3 per cent.
Forex
The dollar index (DXY) — a measure of the greenback against a basket of currencies — is up just 0.1 per cent at 100.49 as the “Trump trade”, which took the DXY to a 14-year high of 103.82 at the start of the year, struggles to regain momentum.
The euro is adding 0.2 per cent to $1.0671 after the upbeat PMI but the British pound is easing 0.3 per cent to $1.2508 after the UK factory survey came in shy of expectations.
Japanese manufacturers in the Tankan survey predicted the yen to average ¥107.3 per dollar in the March survey, a weakening from the December quarter’s ¥104.9. In early European trade the yen is 0.1 per cent weaker at ¥111.46 after a 0.5 per cent gain on Friday.
The Australian dollar took a tumble after data showed retail sales contracted 0.1 per cent month on month in February, from 0.4 per cent growth the previous month and below economists’ expectations. The Aussie is off its session lows but still down 0.3 per cent at $0.7605.
Following a volatile week for the rand after South Africa’s finance minister was dismissed by President Jacob Zuma, the currency is again under pressure, off 1 per cent to 13.5539 against the greenback.
Fixed income
The positive mood in stocks is helping damp demand for US sovereign bonds, nudging up yields.
The benchmark 10-year Treasury yield is adding one basis point to 2.40 per cent and the more policy-sensitive US 2-year note is climbing 2bp to 1.28 per cent ahead of the monthly jobs report due at the end of the week.
German debt is a touch more popular amid lingering political concerns, including around the upcoming French election and UK/Spain relations concerning Gibraltar. The “haven” 10-year Bund yield is down 2bp to 0.31 per cent.
Commodities
Oil prices are little changed as traders continue to ponder high inventory levels amid the ongoing Opec production cut agreement and the burgeoning US output.
Brent crude, the international energy benchmark, is down 0.1 per cent at $53.50 a barrel and West Texas Intermediate, the main US contract, is off 0.1 per cent at $50.55.
Gold, which tends to struggle in the face of a firmer dollar and rising Treasury yields, is down 0.2 per cent to $1,246 an ounce.
Additional reporting Peter Wells in Hong Kong
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