The Weekly Update

With the Easter holidays the week got off to a slow start. There was talk from the Federal Reserve officials about the conditions under which they would cut interest rates, including a scenario where inflation drifts lower even if the economic growth doesn't falter. Such a scenario isn't seen as particularly likely, and they said a rate cut isn't imminent or under consideration for their meeting April 30-May 1. However, the threshold for such action has been a topic of conversation in recent interviews and public remarks.

In the markets, the S&P 500 touched fresh highs, closing the week just shy of 2,940, after gaining 1.2% on the week. US Treasuries made parallel gains with 10-year yields falling 6 basis points and back below 2.5%. Meanwhile, the US dollar made further gains with the DXY Index closing out the week by pushing above 98 for the first time in nearly 2 years.

It looks as though the Trump administration may concede to a Chinese proposal that would give less protection for U.S. pharmaceutical products than they receive at home according to reports, a move that could draw the wrath of the American drug industry. Under the Chinese offer being discussed as part of wider trade talks, U.S. pharmaceutical companies would get eight years of regulatory data protection in China for the biologics they develop, according to those close to the idea.

Microsoft beat market estimates with its earnings, raking in $30.6 billion in revenue as it racked up several new cloud-computing deals and agreements from previous years began to pay off. Net income was $1.14 a share, besting the $1 consensus. So far, about 80% of S&P 500 companies reporting results so far have topped forecasts. Tesla being one of the outliers, kicking off the year with a $494 million loss and fresh concerns about its cash. Amazon also blew profit estimates out of the water, posting earnings of $7.09 a share on the strength of its cloud-computing, advertising, and other high-margin businesses. Analysts had projected $4.67 a share. Revenue gained 17%. The current quarter might not be as bright though: Sales and income outlook for the current quarter is on the light side, while advertising revenue growth is slowing. We also saw that PayPal will invest around $500 million in Uber in a private placement at the IPO price. The ride-hailing company plans to start marketing shares in a range of between $44 to $50, figures that could value the company at $80 billion to $90 billion. It could aim to raise about $8 billion to $10 billion in the listing.

News of the Socialists win in the Spanish elections came in over the weekend,  with the “Popular Party” (most recently voted out of rule) losing over half their seats: from 137 to just 66. With right-wing “Vox” also gaining seats – the Socialists along with Podemos still need 11 more seats to reach a governing majority; a clearer picture should emerge in the coming weeks. In the economic calendar: Eurozone business confidence and US PCE data are released on Monday; on Tuesday we see some PMI data out of China, inflation data from Germany and France, US and UK consumer confidence and Eurozone Q1 GDP reading; on Wednesday focus returns to the Fed’s interest rate decision with the BoE rate decision on Thursday along with China, Eurozone, Germany and France manufacturing PMI, Germany retail sales and US factory orders and jobless claims; lastly on Friday we’re already back to another round of non-farm payrolls data out of the US.

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