US Opening Call – Tuesday 13th May 2014
Retail sales to provide confirmation of recovery in April
- Disappointing Chinese and eurozone numbers partially factored in;
- European indices and euro slip on dreadful ZEW readings;
- M&A chatter continues to buoy investors;
- US retail sales could provide a boost following disappointing morning.
US futures are pointing to a slightly higher open again on Tuesday, as investors continue to look beyond the ongoing crisis in eastern Ukraine and instead focus on the improving economic data and reports of more M&A activity. The Dow and S&P are expected to open at new record highs again today, with futures showing the indices opening 35 points higher at 16,730 and 3 points higher at 1,899, respectively, while the Nasdaq is expected to open 4 points higher.
From an economic data standpoint, it’s actually been a fairly disappointing start to the day with misses being seen in both the Chinese and eurozone releases. That said, at this stage you have to wonder how much of this disappointment has already been factored into people’s calculations. China has been slowing for months now so another deterioration in industrial production and fixed asset investment is hardly a surprise. Perhaps the retail sales number could have been a little better but clearly investors have already priced in a disappointment here.
The same can be said of the ZEW surveys for Germany and the eurozone this morning, with the economic sentiment segments of both falling well short of expectations. The difference here is that while a small miss may have been anticipated, the numbers were well short of both the April and forecast numbers which is why we have seen sentiment take a hit towards the end of the morning of the European session. The crisis in Ukraine and potential for further sanctions on Russia has the potential to negatively impact the eurozone more so than the US, so this negative impact on sentiment is likely to continue until we either see evidence suggesting otherwise, or tensions ease. This looks unlikely at this stage though.
All of the M&A chatter in the market is really helping to lift sentiment right now and provide a welcome distraction from all of the negativity that weighed on markets earlier this year. AT&T has become the latest company to look at takeover options, with Direct TV the target being discussed today, while reports of acquisitions continues to buoy the healthcare sector as Pfizer prepares a second bid for AstraZeneca.
Attention will turn to the US following the opening bell on Wall Street, with plenty of data being released. The most important of these will be the retail sales number which is expected to show growth of 0.4% in April, which isn’t as bad as it looks given that it follows a 1.1% spike the month before. The surge in March can largely be attributed to sales falling in the preceding few months due to the unusually poor weather. The question now is whether any of the drop in spending in those months also carried over to April which could give another strong reading. The fact that auto sales fell in April despite heavy discounting would suggest not but I wouldn’t count it out. The other data for April has been pretty good, particularly in the labour market, and this could have inspired consumers to hit the shops.
Read the full report at Alpari News Room
