World markets themes for the week ahead

LONDON: Following are big themes likely to dominate thinking of investors and traders in the coming week and the Reuters stories related to them. Brace, brace

The focus is on the hotly anticipated US results: Firstquarter earnings for S& P 500 companies are expected to fall 2.5 per cent on the year in what would be the first quarterly decline since 2016. But revenue is expected to rise 4.8 per cent.

Those earnings will be crucial to see if the bull market can keep running. Some have argued the Federal Reserve’s patience on rate increases this year as well as stock buybacks will add fuel to the S&P’s rally.

Also boosting the S&P 500 Index are the recent performance of the banks and financials, which had suffered more than the broader market in the fourth quarter, when recession fears scared investors away.

First out of the blocks was JPMorgan, which reported a better- than- expected quarterly profit as higher interest income and gains in its advisory and debt underwriting business offset weakness in trading.

Bank of America, Bank of New York Mellon, Goldman Sachs and Morgan Stanley are all scheduled to release their results in days to come.

Large banks have indicated that muted capital market activity at the start of the year caused by sluggish trading volumes will be a drag on overall results. Financials are expected to deliver 1.8 per cent earnings growth, according to I/B/ E/S Refinitiv.

Share performance may boil down to valuation. For the next 12 months, Goldman Sachs appears the cheapest, with investors paying US$8.30 for every dollar in expected earnings, compared with US$11.80 for Bank of New York Mellon. The former is the worst-performing stock over the last two years among US banks. Are you ok?

April manufacturing activity data will give a glimpse of the economic health of the US and the eurozone.

Chinese GDP data will provide an update on the health of the world’s second-largest economy.

Dismal March PMIs for the US and eurozone sent shivers through markets.

They were taken as ominous signs for the global economy as international trade tensions hurt factory output.

But robust factory data from Beijing offered hope that efforts to shore up China’s economy are kicking in, which injected further fuel to the global equity rally.

The IHS Markit flash Purchasing Managers’ Index due on April 18 should indicate if that optimism was justified — and if stocks have further upward momentum. China’s first-quarter GDP data is out on April 17.

Many investors say low expectations for first- quarter earnings, dovish central bank policies and hopes for Chinese stimulus and a trade truce between Washington and Beijing are largely priced into equity markets.

With all that baked in and investors still scrambling for consensus on what happens over the rest of 2019, there’s a lot riding on that data. Polls, pins and needles

The world’s largest and thirdlargest democracies are going to the polls. Indonesia holds parliamentary and presidential elections on April 17.

India’s elections are spread over seven phases and 39 days.

Both countries face similar issues around anti-incumbency and flailing economic growth.

Betting on continuity, investors have pumped money into their markets, driving up bonds and stocks.

Polls in Indonesia suggest President Joko Widodo, or Jokowi, who faces his opponent from 2014 once again, will not only win reelection but will also emerge with a stronger coalition.

Indonesian markets have also always scored well in election years.

So it’s India that investors should be sweating over. — Reuters