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Optimism surrounding the US/China trade agreement pushed the indices up

April 08, 2019 17:30

Last week was full of optimism in the stock markets. Investors evaluated data from China very positively, which indicated about country's economic stabilization and the U.S. and China's management comments on a trade agreement.

Both Donald Trump and Xi Jinping have officially stated that they are approaching a historical agreement of international trade. Main obstacles, intellectual property rights, opening the Chinese market to foreign capital, trade tariffs and other important issues were discussed and common agreements were found. Nevertheless, the final agreement date remains unclear.


NASDAQ and S&P500

The Nasdaq Composite, which appreciated +2.7% performed the best in the U.S. stock market, while Dow 30 appreciated the least of the main indices with +1.9% growth. S&P500 appreciated 2.1% to 2,890-point level and has reached the highest point since 2018 October. Overall, the S&P500 needs to appreciate only 2.0% to reach an all-time high. Market participants attributed this kind of positive market performance to speculations regarding the trade agreement and relatively positive news from China, where the economic slow-down has stabilized.


Shanghai Composite

Last week, China's main stock index, Shanghai Composite appreciated 5.0% to a 12-month high. Positive economic data was one of the main variables in such significant stock market appreciation. Manufacturing sector's Purchasing Managers Index has risen above the 50-point level, which was evaluated by investors as a sign of economic stabilization for the country. Nevertheless, it is only the first indicator, which hints about positive tendencies in the country, therefore it would be useful to wait for more data, which would confirm the prevailing optimism.


Bonds

In U.S. bond market difference between 2 and 10-year bonds remained stable at 0.15% level. Overall, the yields have increased, which indicated that investors last week evaluated the appreciation of the stock market more positively. However, it is important to note that this kind of appreciation is short-term and it is important to wait for a more significant resistance.


Commodities

In commodity market sentiment was very positive. WTI type oil price appreciated 5.2% to 63.3 USD per barrel. Oil price has not only surpassed 200-day moving average, but has increased from the highest point from 2018 November. In metals segment copper price dropped -2.8%, aluminium dropped -0.9% and the price of iron ore increased from 86 to 91 USD/T.

Among different sectors, most of them have recorded appreciation. Best performers were manufacturing and commodities companies, which have appreciated 2.8%. Finance sector companies and utilities companies were also good performers, appreciating 2.6%. Meanwhile, worst performers were utilities companies, whose value marginally decreased by -0.1%.


Stocks

Last week, Walgreen Boots, which is a global pharmaceutical company, announced its financial results and was in the market's spotlight. The company has more than 100 years activity history, which has started from a local pharmacy in the U.S. Big steps was taken in 2014, when U.S. company Walgreens has merged with European company Alliance Boots. This merger has formed a pharmaceuticals and healthcare giant, which is now operating in 25 countries and has 415 thousand employees.

The company has generated 34.5 billion USD revenue last quarter and it was in-line with market expectations. Adjusted profit per share was 1.64 USD, however, market participants have forecast 1.72 USD. Considering revenues of the same stores, compared to the period a year before, revenue decreased -3.8%, because 2018 was an easier flu season. The company's management has also renewed and downgraded the forecast for 2019, and stated that the profit per share will remain unchanged, although earlier they have claimed that the growth will be at 7-12%. Walgreens Boots is yet another company, which significantly cuts down 2019 forecasts and indicates about worsening business conditions in the global economy.

The stock price has fallen -12.6% after the news and reached the lowest point since 2013 October. In the last 12 months, stock price has corrected -13%.


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