No stock market correction for the time being
The Dow Jones closed yesterday for the first time above 34,000 points after an increase of 0.9 percent. The S&P 500 index also reached a new all-time high of 4,170 points. The optimism among investors was fuelled by strong macroeconomic data and good quarterly figures from various companies.
Interest rate decrease
The US labour market is moving in the right direction. The number of first-time applications for unemployment benefits fell by a staggering 193,000 to 576,000 last week. Economists had expected 710,000 first aid applications.
Besides the encouraging labour market figures, the strong increase in retail sales in March was particularly notable. The sales increased by 9.8 percent on a monthly basis much faster than the 6.1 percent that the market had expected. Consumer spending determines about two-thirds of the size of the US economy. Retail sales were therefore well-received by investors.
All the more remarkable was the fall in US capital market interest rates. The yield on ten-year government bonds fell by 10 basis points to 1.53%. Normally, a strong economic recovery leads to rising inflation. Perhaps the words of the Fed Chairman earlier this week will influence the developments in the capital markets. Jerome Powell indicated that the purchase programme would be phased out before interest rates were adjusted. A rise in interest rates this year is therefore very unlikely. The fall in interest rates ensured that the technology exchange Nasdaq showed the largest increase of 1.3 percent on Wall Street yesterday.
Not only in America but also in China retail sales increased strongly. In March, sales rose by 34.2 percent on an annual basis, much faster than the 28 percent that economists had expected. On a monthly basis, the increase was 1.75 percent. The Chinese economy grew strongly on an annual basis, but slightly below expectations. This may have been due to the slightly less exuberant industrial growth.
The strong recovery of the Chinese economy is also reflected in the company figures published so far. Last night Alcoa released its results. The aluminium producer had the best quarter in the last two years because of the strong demand for aluminium products from China.
This morning, the German car manufacturer Daimler released preliminary results. Daimler performed significantly better than expected in the first quarter. The demand for Mercedes cars increased in all regions, but especially in China. The final figures will be presented on 23 April.
Cosmetics giant L’Oréal is also doing well. Sales rose 10 percent year-on-year in the first quarter. In particular, the performance of the dermatological cosmetics division and the demand from China stood out. The figures were better than expected and L’Oréal sees both turnover and profit rising further this year. This is also good news for Nestlé with its 23 percent stake in the cosmetics company.
BlackRock, the world’s largest asset manager, released its quarterly results yesterday. Profitability was slightly above the market consensus. Topman and founder Larry Fink told business channel CNBC in the explanation of the quarterly figures that he is very optimistic about the stock markets. The exceptional monetary and fiscal stimuli and the strong company figures will be able to give the stock markets a further boost in the short term. The asset manager does not see any stock market correction for the time being because there is still a lot of money on the sidelines.