Dubai: After global stocks ended March posting gains during the holiday shortened pre-Easter week, analysts currently view the current week setting a positive tone for an even stronger month of April for markets.
Equity markets were closed for Good Friday in the US, Europe and elsewhere and will remain closed in some regions for Easter Monday. The stock market rallies have been driven by massive US stimulus measures and expectations that the vaccine rollout will spur the global economic recovery.
Investors will also be watching to see if US will pass the infrastructure plan President Biden introduced last week. It includes $2 trillion in spending but also contains plans to raise corporate taxes that investors fear could hit profits.
Fairly quiet week
On the economic and corporate front, the coming week is fairly quiet, as investors anticipate the first quarter earnings season.
In the world’s top economy, the US, the Federal Reserve will release the minutes of its last meeting Wednesday, and investors will review them for any fresh comments on inflation.
With prices for fuel already rising in the US, and steadily seen rising in economies worldwide, investors are becoming concerned that more stimulus could send inflation higher.
Strong US jobs data
This followed last week’s stronger-than-expected March US employment data showed that there were 916,000 jobs added in March, compared to the 675,000 expected by economists.
Investors will be watching an appearance by Fed Chair Jerome Powell who is due to discuss the global economy on an IMF panel Thursday.
Meanwhile, the European Central Bank (ECB) is to release its latest meeting minutes on Thursday. Last week ECB President Christine Lagarde said investors could test the bank’s willingness to rein in rising borrowing costs “as much as they want”.
Tweaked growth forecasts
Global policymakers will give a snapshot of the economic fallout from the pandemic, at IMF meetings this week, while also releasing updated forecasts for growth for 2021 and 2022.
IMF Managing Director Kristalina Georgieva has already indicated that the updated World Economic Outlook will see an upward revision to January’s forecast for 5.5 per cent global economic growth this year.
Aside from the updated economic outlook, G20 finance ministers will meet on Wednesday to discuss debt relief initiatives.
Strong Q1 earnings
Economists expect a very strong first quarter of corporate earnings and that should be positive for stocks. Aside from an expected earnings bounce, some analysts have been expecting April to be a bullish time for stocks, as it has been historically.
First quarter earnings are expected to be grow nearly 25 per cent year-over-year, according to Refinitiv data, the first quarter where the prior year results included the impact of the pandemic shutdown.
Some corporate analysts expect the earnings season to bring with it more favorable comments from companies that could lead to positive forecast revisions, providing fuel for global stock markets.
Stocks to rally in April
With the new month of April started off with a rally last week, the market could continue to notch gains as the month gets underway. April has historically been good and has been the best month in terms of average price change, with the second quarter on average recording not-so-big gains.
The second quarter is when generally stocks tend to underperform globally from May through October, backed by the market axiom to ‘sell in May’.
Major global stock benchmarks ended sharply higher a couple of trading sessions into April. In the US, the S&P 500 ended up 1.2 per cent to a new record close. Meanwhile, the Dow Jones Industrial Average climbed more than 170 points, and the tech-heavy Nasdaq Composite jumped 1.8 per cent.