Summary:

  • Wall Street ends yesterday’s trading largely higher with the NASDAQ (US100 on xStation5) leading the gains
  • NZ employment report meets expectations, but the details seem to be equivocal 
  • Chinese Caixin manufacturing PMI comes in subtly above the median estimate 

Major US indices gained traction on Tuesday amid quite tepid trading in Europe where most of stock exchanges were closed due to Labour Day. Equity investors were impatiently awaiting a financial statement from Apple which proved to meet expectations, and the company decided to reward investors with increased dividend as well as a new buyback program. First of all, let us notice that Apple sold 52.2 million iPhone, 9.1 million iPad and 4.1 million Mac during its second fiscal quarter – all numbers were more or less in line with analysts’ estimates. Earnings per Share or EPS totalled $2.73 beating the median estimate at $2.64. However, why the stock gained several percent following the report despite no upside surprise? Namely, the company announced a new $100 billion buyback program and a 16% rise in the dividend – these are the most desirable features equity investors look for, and therefore the stock shot up. The regional breakdown illustrates that each region managed to improve its sales numbers with Greater China and Japan being the best. Thanks to upbeat moods swirling around Apple the NASDAQ (US100) ended the day with a 0.9% increase. The SP500 (US500) gained 0.25% while the Dow Jones (US30) lost almost 0.3%. Nevertheless optimistic have not been shared by Asian stocks as both Hang Seng and Shanghai Composite are set to close lower. 

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The US100 is constantly flirting with its 150DMA constituting the nearest support line for buyers. Taking into account that most of companies have beat expectations so far it seems that front this point of view US technological shares have space to gain a foothold going forward. Source: xStation5 

Looking beyond stock markets it’s worth taking a closer look at the NZ employment report being printed overnight even as the NZ dollar just barely responded. It showed that unemployment rate fell in the first quarter to expected 4.4% from 4.5% seen during the prior quarter, but the other numbers did not turn out so impressive. Employment growth dropped to 3.1% from 3.7% falling short of expectations at 3.3%, whereas the participation rate ticked down to 70.8% from 70.9% despite a 0.1pp expected rise. The data concerning wage growth was mixed alike illustrating that private sector growth including overtime amounted to 0.5% missing the forecast at 0.5% (having overtime stripped out there was a disappointment as well). On that account a 1.1% increase of average hourly earnings smashing the median estimate at 0.5% does not look so encouragingly as much of it could have resulted from public sector. This data in conjunction with dormant price pressure suggest there is no a rush to lift rates for the time being. 

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Given powerful bearish momentum there is no point in kicking with the market as the price could slide as low as 0.6820 or so before finding any stronger support. In addition, the still present US dollar strength should also prop up sellers in this market. Source: xStation5

Finally let’s add that Chinese Caixin manufacturing PMI for April came in ar 51.1 exceeding the median estimate set at 50.9 and making a tiny improvement from March (51). However, the devil is in the details and the report saw a shrinkage of export orders for the first time since November 2016. Hence, even as the slump was a marginal it raises concerns regarding fading global demand.