Global investors brace for end-of-month volatility

Dubai: The last week of April is one that is usually extremely busy for stock markets, so investors will continue to look for signs of pandemic-related progress among companies reporting results worldwide.

On the corporate earnings front, Big Tech is a highlight of the US earnings calendar, with industry giants like Apple, Microsoft, Amazon, Facebook, Alphabet all releasing results, alongside Tesla, Starbucks, Boeing, Ford Motor, Exxon Mobil, Chevron, Clorox and Colgate.

A third of the US companies, which are part of the key S&P 500 benchmark index, are reporting earnings, apart from a key US Federal Reserve meetings this week, alongside new spending and tax proposals from the White House.

Biden’s first speech to Congress

This is as US President Joe Biden gives his first speech to Congress, which will include an increase in the capital gains tax. Analysts weigh the possibility of whether this will lead to a fallout in stock markets.

After another choppy week for investors where markets witnessed a brief bout of volatility, the intensity looks to ramp up next week, analysts evaluate. Heading into the end of April, central banks and earnings will give direction to the markets.

Earnings are coming in much better than expected, and expectations were high. However, it’s the future prospects that investors care about more when these companies present their quarterly report cards.

US Federal Reserve meets

The US Federal Reserve meets this Tuesday and Wednesday on interest rates and monetary policy. While it is not expected that the Fed will make any changes to their stance till 2023, many have tightened their timelines about when that should happen, given the strength of the economic recovery.

The European Central Bank (ECB) held its ground last week while the Bank of Canada (BOC) chose to taper bond purchases from C$4 billion per week to C$3 billion per week.

The BOC has been the favourite to first raise rates. However, with the recent wave of coronavirus cases and lockdowns in Canada, investors were in doubt heading into the meeting last week. The ECB stood pat and provided little new information.

Shifting stance of FOMC, BOJ?

This has led to queries among economists on where the US Fed and the Bank of Japan (BOJ) stands as a result.

At the March meeting, the US Fed left rates unchanged and noted that bond purchases would continue at its current pace until employment fully recovered and inflation was sustainably above 2 per cent. Although the labour market has picked up, it is still well below pre-pandemic levels.

However, without new forecasts at this US Fed meeting, analysts say to expect more of the same. Much of the same can be said for the BOJ, who meet on Tuesday.

At BOJ’s last meeting, they announced they would widen the band around the zero target on the 10-year Japanese Government Bond (JGB) from 20 basis points to 25 basis points, removed guidance that they will buy 6 trillion Japanese Yen annually.

BOJ likely to remain on hold

The BOJ is likely to remain on hold until they have more time to see the effects of these decisions. In addition, with coronavirus breakouts across the country, the central bank is unlikely to act again until the pandemic is back under control.

In addition to the central bank meetings this week, the US will hold a 7-year note auction, Germany will release their employment change, and first-quarter GDP growth rates from several countries will be released.

With more central banks meetings this week, Big Tech earnings, and continued increases in coronavirus cases in several parts of the world, this week will provide traders and investors with loads of useful information to base their trading and investment decisions.

Moreover, in light of recent strong economic data, end of month price action, and stocks nearing an all-time highs, market analysts further view that stocks may see some volatility heading into May.

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