Five Things You Need to Know to Start Your Day
Want to receive this post in your inbox every morning? Sign up here
China trade talks, Alibaba earnings and U.S. payrolls set the stage for an eventful end to the week. Here are some of the things people in markets are talking about.
The U.S. and China wrapped up their first day of trade talks on Thursday, without giving any sense of progress on a deal to stop an escalation of trade barriers. Senior officials declined to comment to reporters upon arrival at their hotel after the meetings, but a White House economist described the first day as "fairly positive." Talks are expected to resume on Friday, and data out overnight may complicate matters. The U.S. Commerce Department reported that America’s merchandise trade gap with China widened by 16% to $91.1 billion in the first quarter. A separate report confirmed China is canceling U.S. shipments of soybeans.
Jack Ma Jitters
Jack Ma’s shopping spree is starting to weigh on Alibaba’s bottom line just as profit and revenue growth ease. Investors have shaved $61 billion off its market value to voice their displeasure. Alibaba is projected to post its first decline in profit in a year and a half -- the result of folding in major loss-making businesses and heightened spending to fend off a charge by Tencent into retail and payments. While revenue is expected to climb 53 percent to 59 billion yuan ($9.3 billion), that would actually be its smallest gain in seven quarters. Investments into logistics, cloud computing and physical retail have come at a cost, coupled with a global technology selloff.
Stocks Rebound Falls Just Short
U.S. stocks rallied back from a four-week low, with major averages bouncing off of key technical levels, but still ended down for the second straight day. The S&P 500 recovered more than 1 percent from session lows, buoyed by tech shares. The rebound came after the gauge slumped through its 200-day moving average, a level that has provided downside support five times since February. The rally was hampered by falling Treasury yields, which weighed on financial firms. The slide in EM equities continued unabated, however, with the MSCI Emerging Markets Index tumbling 1.2 percent, its third-straight loss. Argentina and Turkey remain in investors’ cross hairs, with both nations’ currencies tumbling amid concerns over central bank policy.
Goldman Has Three Reasons Not to Freak Out
Investors should just relax, according to Goldman Sachs. Appetite for riskier assets such as stocks and high-yield bonds has been suppressed by a number of factors that have come up around the same time, but the headwinds may be transitory, according to the firm. Economists point to the sideways movement in the S&P 500 Index since the early-February market meltdown as evidence that nervous traders are unwilling to take a stance. “First, we maintain our conviction in the strong outlook for global growth despite the recent dip in global activity indicators. Second, concerns over monetary tightening are likely overdone. Third, the technical headwinds that have weighed on risk sentiment look likely to ease.”
Trade talks will dominate Friday's agenda once again. Investors will also be mining the RBA's Quarterly Monetary Policy statement for clues to Australia’s outlook. Also due: Philippines CPI, PMI reports for Singapore and Hong Kong, along with Malaysian trade figures. When they return from their weekend, they’ll have Friday's U.S. jobs data to digest. Economists are predicting a rebound in nonfarm payrolls after a surprisingly weak March, and investors will be looking closely at whether wage growth accelerated in April.
What we've been reading
This is what's caught our eye over the last 24 hours.
- Here's how Trump led the U.S. and China to the brink of a trade war.
- Manila's property prices are on a tear.
- What will be left of HNA's empire?
- Where to invest $10,000 right now.
- Bitcoin bulls are cheering the Goldman news… but should they?
- The big winners from India's cash clampdown are private bankers.
- Elon Musk told investors not to buy Tesla if they can't stomach volatility.
— With assistance by Garfield Clinton Reynolds