Market Update – 26th April 2023.

26th April 2023

So far this week markets have remained focused on earnings season, with investors awaiting reports from the big tech companies such as Alphabet, Microsoft, Meta and Amazon, given the sector’s influence on market gains this year. Amidst the banking turmoil in March, Apple and Microsoft accounted for nearly half of the S&P 500’s gains as large-cap tech served as a haven for investors.

Earnings reports from Microsoft and Alphabet released after the bell yesterday showed signs of resilience with core businesses holding up better than expected in Q1 of 2023, pushing their shares higher and boosting rival tech companies due to report later this week. The results come after both companies announced in January that they were cutting thousands of jobs to reduce their costs. The first-quarter results should assist wider technology equities as well as broader equity markets in regaining momentum.

In the US, lawmakers appear to be at odds on lifting the $31.4 trillion debt ceiling for the Federal Government. Kevin McCarthy, the speaker of the Republican-controlled House, tried to reopen negotiations with the White House by laying out his plan to raise the debt ceiling in exchange for government spending reductions that would delay the implementation of Joe Biden’s climate and healthcare legislation. Democrats have not yet demonstrated any desire to negotiate the debt ceiling. On Wednesday, when Biden criticised the Republican plan, he reaffirmed the need for a “clean” debt ceiling bill or one that raised the government’s borrowing limit without imposing any restrictions. The reality is that this is something that occurs fairly frequently in the US and with a vote due to take place sometime this week, this will prevent the shutdown of national parks and public sector work.

Markets are largely expecting the Federal reserve to hike rates by 25 basis points next week and so investors will be looking to this week’s data on US wages and economic growth to see if it is supportive of additional tightening.

Still to come this week we have personal consumption expenditures (PCE), which is the Fed’s preferred measure of inflation as it considers consumer spending and includes all goods and services bought by U.S. households. We also have US durable goods orders; US & Eurozone Q1 GDP; and Japanese retail sales.

Investment Management Team