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Market roundup
Most major stock markets edged higher this week following a raft of positive earnings reports and a pledge from the US Federal Reserve to maintain its accommodative monetary policy.
News that American holidaymakers could be allowed to travel to the EU this summer boosted UK and European stock markets on Monday, with the travel sector performing particularly strongly. The FTSE 100 added 0.4%, while the pan-European STOXX 600 gained 0.3%.
Stocks were weaker on Tuesday as the Fed policy meeting got underway and investors awaited earnings reports from big technology firms.
Japan’s Nikkei 225 added 0.2% on Wednesday after figures showed retail sales in March grew by 5.2% from a year ago. Strong results from the banks boosted European indices, with France’s CAC 40 and Spain’s IBEX 35 both gaining 0.5%.
The Fed’s decision to hold interest rates at near zero helped the FTSE 100 top 7,000 at Thursday’s open, although it ultimately ended down 0.03% at 6,961. Wall Street stocks closed in the green following strong earnings from Apple and Facebook.
The FTSE 100 was up 0.3% at Friday’s open, with pharmaceuticals firm AstraZeneca the top riser following a 15% surge in revenue in the first three months of the year.
Company in focus: HSBC
Shares in HSBC rose on Tuesday after the bank’s first quarter results showed reported pre-tax profit surged by 79% from a year ago to $5.8bn.
All regions were profitable, but the UK performed particularly strongly with reported pre-tax profits of more than $1bn in the quarter.
Reported revenue fell by 5% to $13bn, which the bank said reflected the continued impact of lower global interest rates.
Lending rose by $2bn on a reported basis and by $6bn in local currency terms, led by strong mortgage demand in the UK and Hong Kong.
HSBC expects mid-single digit percentage growth in customer lending during 2021, although it said growth depends on the speed at which economies recover from the pandemic and the duration of government support measures and restrictions.
“The economic outlook has improved, although uncertainties remain,” said group CEO Noel Quinn. “We carry good momentum into the second quarter, while maintaining conservative positions on capital, funding, liquidity and credit.
Economic roundup
US President Joe Biden marked his 100th day in office by announcing the largest overhaul of US benefits since the 1960s. Biden said the proposed $1.8trn American Families Plan would provide free universal preschool, two years of tuition-free community college, paid family and medical leave, and an extension of tax breaks that were expanded during the pandemic. Meanwhile, the American Jobs Plan would seek to boost investment in public transport, high-speed broadband, and roads and bridges.
Biden also announced that more than 220m vaccine doses had been administered during his first 100 days in office – more than double his initial 100m pledge. However, he acknowledged there was still more work to do to beat the virus, adding: “We can’t let our guard down now.”
Wednesday’s speech came a day after figures from The Conference Board showed US consumer confidence surged to a 14-month high in April to 121.7 from 109.0 in March. This was the fourth month in a row that the index registered an increase, and well above the 113.0 reading forecast by economists in a Reuters poll. The survey’s present situation index, based on consumers’ assessment of current business and labour market conditions, soared to 139.6 from 110.1 the previous month, while the expectations index climbed to 109.8 from 108.3.
“Consumers’ assessment of current conditions improved significantly in April, suggesting the economic recovery strengthened further in early Q2,” said Lynn Franco, senior director of economic indicators at The Conference Board. “Consumers’ optimism about the short-term outlook held steady this month. Consumers were more upbeat about their income prospects, perhaps due to the improving job market and the recent round of stimulus cheques.”
Despite signs of a pickup in economic activity, the Federal Reserve voted to leave interest rates at near zero and the pace of asset purchases unchanged. Fed chairman Jerome Powell said the recovery is “uneven and far from complete” and that while inflation pressures could rise in the coming months, these “one-off increases in prices are likely to have only transitory effects on inflation”.
In the UK, retail sales volumes in April were seen as good for the time of year for the first time in 2021, according to a survey of businesses by the Confederation of British Industry (CBI). The hardware & DIY and furniture & carpets subsectors saw sales significantly above seasonal norms, thanks to consumers’ focus on home improvement. However, clothing and footwear store sales remained well below seasonal norms. Ben Jones, principal economist at the CBI, said retailers are still facing challenges around inventory management and their supply chains, amid trade disruption, big shifts in consumer behaviour, and uncertainty over how long social distancing measures could remain in place.
In Europe, the economic sentiment indicator soared in April to 110.3 from 100.9 in March. Confidence improved in all the surveyed business sectors – industry, services, retail trade, and construction – and among consumers. Sentiment rose in the six largest EU economies, most so in Poland (+11.3), followed by The Netherlands (+10.7), Spain (+9.1), France (+8.5), Germany (+5.7) and Italy (+5.3)