In summary
• The week ahead kicks off with question marks around US government debt sustainability
• US credit rating picture gets a knock as the last of the three credit rating agencies plays ‘catch-up’
• China’s latest economic data paints a mixed picture
• Latest quarterly company results season draws to a close
The week ahead kicks off with question marks around US government debt sustainability
This week is likely to see a return to questions around US government debt sustainability (with possible reverberations over similar questions for other countries around the world), arising from a US sovereign credit rating downgrade by credit rating agency Moody’s announced on Friday evening – as such, there is likely to be a negative reaction carrying over into markets today as investors catch up on the news. Otherwise, on the agenda for this week, investors will have global Purchasing Manager Index economic survey data (Thursday), a UK inflation reading (Wednesday), an Australian central bank interest rate decision (tomorrow), and a UK-European Union summit in London (today) to keep an eye on amongst other things. Finally, this week sees the latest calendar quarterly company results season winding down – in focus will be US retailers Home Depot (tomorrow) and Target (Wednesday), and UK retailer Marks & Spencer (also Wednesday), alongside a few other companies left to report.
US credit rating picture gets a knock as the last of the three credit rating agencies plays ‘catch-up’
The US credit rating agency Moody’s downgraded the US sovereign credit rating late on Friday, cutting one notch from Aaa to Aa1. Justifying the move, Moody’s said that “successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs”. For context, the one-notch cut by Moody’s comes more than a year after the credit rating agency changed its outlook on the US rating to negative (back in November 2023) – as such, markets have known this was a risk for a while now, and besides, there is an argument that Moody’s is only playing ‘catch-up’). After all, Moody’s is the last of the big three credit agencies to have cut the US debt rating from the highest tier – the other two credit rating agencies cut well before Moody’s – Fitch downgraded in 2023, while Standard & Poor’s cut over a decade ago, back in 2011.
China’s latest economic data paints a mixed picture
Earlier this morning, China published its latest monthly activity data, for April, including readings on industrial production and retail sales – and closely watched given it reflects on the first month of heightened tariffs between the US and China. Overall, the data was mixed, with industrial output expanding faster than expected in April while consumption disappointed versus expectations. On the numbers, industrial output was up +6.1% in April year-on-year, well ahead of market expectations looking for a +5.5% increase (albeit down from the +7.7% growth recorded in March). Against this however, retail sales grew at an annual pace of +5.1% in April, down from a +5.9% increase in March, and missing market expectations for a +5.5% increase.
Latest quarterly company results season draws to a close
The ‘tariff-war’ dust is settling a bit in markets with 90-day pauses now in effect for the most extreme parts of US president Trump’s tariff polices. As such, there is a small window of opportunity perhaps for investors to turn their attention back to fundamentals and take in what companies have been delivering in their latest quarterly results. According to Factset, who published their latest report last Friday on the US company results season, the vast majority (92%) of constituent companies in the US S&P500 equity index have now reported – of these, 78% have reported earnings ahead of expectations, and which is above the 1-year, 5-year and 10-year averages of 77%, 77% and 75%, respectively. Albeit backward-looking, the numbers suggests that the corporate picture was relatively constructive prior to the most recent tariff-induced volatility.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/individuals/resources/insights/trade-war-tariffs-largely-paused-now-expect-markets-look-elsewhere-direction
With trade-war tariffs largely paused for now, expect markets to look elsewhere for direction this week
In summary
• The week ahead kicks off with question marks around US government debt sustainability
• US credit rating picture gets a knock as the last of the three credit rating agencies plays ‘catch-up’
• China’s latest economic data paints a mixed picture
• Latest quarterly company results season draws to a close
The week ahead kicks off with question marks around US government debt sustainability
This week is likely to see a return to questions around US government debt sustainability (with possible reverberations over similar questions for other countries around the world), arising from a US sovereign credit rating downgrade by credit rating agency Moody’s announced on Friday evening – as such, there is likely to be a negative reaction carrying over into markets today as investors catch up on the news. Otherwise, on the agenda for this week, investors will have global Purchasing Manager Index economic survey data (Thursday), a UK inflation reading (Wednesday), an Australian central bank interest rate decision (tomorrow), and a UK-European Union summit in London (today) to keep an eye on amongst other things. Finally, this week sees the latest calendar quarterly company results season winding down – in focus will be US retailers Home Depot (tomorrow) and Target (Wednesday), and UK retailer Marks & Spencer (also Wednesday), alongside a few other companies left to report.
US credit rating picture gets a knock as the last of the three credit rating agencies plays ‘catch-up’
The US credit rating agency Moody’s downgraded the US sovereign credit rating late on Friday, cutting one notch from Aaa to Aa1. Justifying the move, Moody’s said that “successive US administrations and Congress have failed to agree on measures to reverse the trend of large annual fiscal deficits and growing interest costs”. For context, the one-notch cut by Moody’s comes more than a year after the credit rating agency changed its outlook on the US rating to negative (back in November 2023) – as such, markets have known this was a risk for a while now, and besides, there is an argument that Moody’s is only playing ‘catch-up’). After all, Moody’s is the last of the big three credit agencies to have cut the US debt rating from the highest tier – the other two credit rating agencies cut well before Moody’s – Fitch downgraded in 2023, while Standard & Poor’s cut over a decade ago, back in 2011.
China’s latest economic data paints a mixed picture
Earlier this morning, China published its latest monthly activity data, for April, including readings on industrial production and retail sales – and closely watched given it reflects on the first month of heightened tariffs between the US and China. Overall, the data was mixed, with industrial output expanding faster than expected in April while consumption disappointed versus expectations. On the numbers, industrial output was up +6.1% in April year-on-year, well ahead of market expectations looking for a +5.5% increase (albeit down from the +7.7% growth recorded in March). Against this however, retail sales grew at an annual pace of +5.1% in April, down from a +5.9% increase in March, and missing market expectations for a +5.5% increase.
Latest quarterly company results season draws to a close
The ‘tariff-war’ dust is settling a bit in markets with 90-day pauses now in effect for the most extreme parts of US president Trump’s tariff polices. As such, there is a small window of opportunity perhaps for investors to turn their attention back to fundamentals and take in what companies have been delivering in their latest quarterly results. According to Factset, who published their latest report last Friday on the US company results season, the vast majority (92%) of constituent companies in the US S&P500 equity index have now reported – of these, 78% have reported earnings ahead of expectations, and which is above the 1-year, 5-year and 10-year averages of 77%, 77% and 75%, respectively. Albeit backward-looking, the numbers suggests that the corporate picture was relatively constructive prior to the most recent tariff-induced volatility.
Contact us
0203 418 0257
info@onekc.co.uk
References
Source: https://www.brooksmacdonald.com/individuals/resources/insights/trade-war-tariffs-largely-paused-now-expect-markets-look-elsewhere-direction
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