Stocks tipped to regain footing as US, China data to show rising output

Although the main local focus in the week ahead will be the government budget on Thursday, the global focus will be on business activity in China and US reports on retail sales, housing starts and industrial production.

Elsewhere, Brazil’s central bank is expected to cut interest rates in its monetary policy statement.

On Wall Street, stocks made their biggest one-week gains since March.

Data on producer and consumer prices suggested inflationary pressures are still soft, reassuring investors that prices aren’t rising at a pace that would force the US Federal Reserve to accelerate its pace of interest-rate increases.

Oil prices stalled after surging to more-than-three-year highs after President Donald Trump’s decision to pull the US out of the Iran nuclear deal.

US crude futures settled at $US70.70 a barrel, a rise of 1.4% for the week. Brent, the global benchmark, finished at $US77.12, a rise of 3.0%.

Energy stocks rose and shares of technology companies extended their recovery, with Google parent Alphabet, Facebook and PayPal all up more than 4% for the week.

Verizon Communications rose 3%, its third biggest one-day gain of the year after JP Morgan Chase analysts upgraded their rating for the stock to “overweight” from “neutral.”

Stocks regain footing
This suggests the stock market could finally be regaining its footing following a wave of volatility that had pulled major indexes down more than 10% from their all-time highs.

“Investors have been so worried about inflation and higher rates, and it’s just not happening,” says Karyn Cavanaugh, senior market strategist at Voya Investment Management.

“I’m looking for all of the miserable things I could think of, and most of it seems to have already been priced in.”

The Dow Jones Industrials Average rose 91.64 points, or 0.4%, to 24,831.17, advancing 2.3% for the week.

The S&P 500 added 0.2%, to 2727.72 and posted a 2.4% weekly gain while the Nasdaq Composite edged down less than 0.1%, to 7402.88 for a 2.7% weekly advance.

US government bonds edged lower after a report showed consumer sentiment was steady in May, exceeding forecasts that it would decline to start the month.

The yield on the benchmark 10-year Treasury note settled at 2.971%, unchanged from Thursday’s close. This was the fifth weekly gain in six weeks.

The Stoxx Europe 600 closed up 0.1%, boosted by gains in shares of basic-resources companies. France’s CAC 40 was down 0.07%, Germany’s DAX eased 0.2% and the UK’s FTSE 100 was up 0.3%.

The week ahead
In the week ahead, the monthly business activity data in China, due on Tuesday, may show slightly faster industrial output growth and largely steady investment and retail sales.

March retail sales in the US increased a seasonally adjusted 0.6% from the previous month, and April data due from the Commerce Department on Wednesday (New Zealand time) is expected to show a 0.3% increase on the month.

Data on April housing starts are expected to show a 0.8% compared with 1.9% in March.

The Federal Reserve’s April industrial production is expected to be 0.6%, compared with a seasonally adjusted 0.5% in March. Capacity utilisation, a measure of slack in the industrial economy, increased 0.3 percentage point to 78%, the highest level in three years.

Brazil’s central bank is expected to cut its benchmark rate to a record low of 6.25%, from 6.5%, as inflation remains below target and the economy is lukewarm. 

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