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US stock markets remain at all-time highs

May 06, 2019 11:00

Last week higher volatility could be felt in the markets, although it did not prevent US indices from appreciating further. The US central bank meeting on Wednesday brought in a slightly negative sentiment, when bank members stated that the current interest rate level was inline with the current economic situation, though investors were hoping to hear cues for the lowering of interest rates.

In US stock markets, the best performer was the Nasdaq Composite, which appreciated 0.2% and recorded a new all-time high. The S&P500 also appreciated by 0.2% to 2,945 points, also hitting a new all-time high. Sentiment in the US stock market remains positive and investors should not resist this trend, although it is important to note that economic data and the bond markets do not provide support for this rapid increase in stock value.

China's stock index, the Shanghai Composite, experienced a marginal correction, depreciating by 0.3% as Manufacturing Purchasing Managers Indices were announced. The Manufacturing Purchasing Managers Indices results were 50.1 and 50.2 points, which indicated that the sector situation was relatively stable.

In the US bond market, the difference between 2- and 10-year bonds marginally decreased from 0.21% to 0.19%. Bond yields remained relatively stable, though Wednesday's central bank meeting encouraged a short-term correction and sell-out of bonds. Overall, bonds continue to show opposite signals to the stock market.

In the commodity market, the sentiment was pessimistic. WTI decreased by 2.3% to USD61.9 per barrel, depreciating for the second consecutive week. In metals, the copper price decreased by 2.6%, aluminum dropped by 1.0% and iron ore remained stable at 93 USD/T. It is important to note that the curve of iron ore futures prices shows a possible correction, as the 6-month future price is USD85, while the 12-month future price is USD77. These prices indicate a lower demand in upcoming months.

Among different sectors, the best performers were consumer goods and manufacturing companies, whose value by increased 1.2% per week. Negative results were demonstrated by technology and commodities companies, whose prices have corrected by 0.8% and 1.7% accordingly.

Last week, quarterly results were also announced by Alphabet, better known as Google. The most important business in the Group remains the Google platform, which accounts for most of the revenue and profit in the Group. The company's management decided not to pay dividends and to invest the capital into new business activities, such as subsidiary company Waymo, which is developing a prototype for autonomous cars. Not paying dividends left Alphabet's balance sheet particularly strong, with some USD110 billion in cash.

Alphabet generated USD36.3 billion revenue in the first quarter of 2019, which fell behind the market's expectation of USD37.3 billion. Revenue growth was at 17% compared to last year. Adjusted profit per share was USD11.9 and exceeded USD10.6 market forecasts. However, this growth was not inline with market expectations. Consequently, Alphabet's stock price dropped 8% after the results were announced. Having said that, Alphabet is still doing exceptionally well, with its stock price having increased by 26% over the past 12 months and its market capitalisation being USD825 billion.

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