The Week in Review: 1st-5th April


Trading Performance
The first week of April marked a start to the second quarter of 2024. I took a total of five trades, starting on Tuesday when UK and EU markets reopened following the Easter break. As of Friday, none of these five positions had been closed. Despite UK markets not being my typical playground, I focussed all of my activity between the 1st and 5th on two UK-listed equities. With a confluence of fundamental, firm-specific, and technical signals providing a strong trading foundation throughout the week. I took three long positions on Tuesday, forming the base of the trade, which I added additional shares to through Wednesday and Friday, exploiting short-term price reversals while trade fundamentals remained largely unchanged.

As of the UK market close on Friday the 5th of April, the week’s total unrealised PnL sat at -1.05%. Positions struggled to build momentum through Tuesday and Wednesday as media coverage pushed against market direction. Sentiment changed through Thursday, in line with expectations, as net performance broke into the green for the first time. However, I was blindsided by a swing in US market direction through Thursday afternoon, which seemed to spill over into markets internationally by Friday’s open. While this doesn’t seem to warrant too much worry, with US indexes rebounding off the back of Friday’s employment prints, a sharper move could have seen positions liquidated at their respective stop loss levels.

A slump in personal trading activity should only be temporary, as I build out a cash position awaiting stronger signals across several FX and US equity trade setups I have bene monitoring for just over two weeks.


USA
US markets traded downwards last week, with all three major indexes closing Friday’s session lower than their respective Monday opening prices. The Dow ($INDU) led declines, falling 2.27%, followed by the Nasdaq 100 ($NDX) which fell 1.34%, and S&P 500 ($SPX) which fell 1.02%. Macroeconomic stimuli thinly spread, the main market moving events being Monday’s March ISM manufacturing PMI figures, Wednesday’s Fed Chair Powell address, and Friday’s non-farm payroll and total unemployment prints.

Manufacturing PMI figures presented a positive shock, as markets benefited from an expansion of industrial output through March. PMI was recorded at 50.3, ahead of analyst expectations of 48.3, signalling that despite recent setbacks US industrial activity is once again growing at a healthy rate.

Jerome Powell failed to turn heads, sticking to the cautious narrative that Fed officials have followed throughout the first quarter of 2024. The narrative suggests that while rate cuts are to be expected into the second half of 2024 the Fed will delay a revision of policy if inflationary pressures persist, or worse, increase.

Interpretations of Friday’s employment prints varied, as US Non-Farm payrolls rose 303,000 during March, exceeding analyst expectations of 212,000. A rise in NFP figures exhibits inflationary undertones as economic output rises, and job markets tighten. As noted on the day, total unemployment figures failed to calm such inflationary narratives, with rates falling 0.1 percentage points from February to 3.8% in March. However, markets rose through Friday, as the major indexes recorded their strongest sessions of the week, erasing most of the losses witnessed during a sudden somewhat unexpected downturn in momentum on Thursday afternoon.


Europe
European equity performances followed the same general downward trend as US equities, as traders returned to their desks on Tuesday following the Easter Break. Losses on UK equities were somewhat shielded, with the UK’s benchmark index the FTSE 100 (FTSE), only falling 0.26% from its Monday opening price, having tested the 8,000 level on Tuesday and closing Friday’s session just short at 7,911.16.

Several key data prints influenced market participants through the week. UK Nationwide’s House Price index data for March was released on Monday, indicating a 0.2% decline in the sale price of homes during the month. This data was supported by Friday’s Halifax house price print which recorded a 1% decline in sale prices, pointing to a slow down in housing market activity. This is likely still the result of interest rate pressures on home buyers, with the BOE unlikely to perform a monetary policy pivot before June.

Additionally, UK services and manufacturing PMI figures were released throughout the week. Manufacturing PMI was reported at 50.3, ahead of analyst expectations of 49.9, indicating an expansion of industrial output through March. Services PMI data fell slightly short of analyst expectations of 53.4, coming in at 53.1, though service sector output expansion remains healthy.


Asia
The Japanese Nikkei 225 (¥N225) slipped under the 40,000 on Monday, with downward pressure resulting in a 1.96% decrease in index price by Friday’s close. Japanese equity performances have shown little benefit from a further depreciation of the Yen. The currency now trading against the US Dollar at ¥151.609, after breaking both 52-week and 30-year lows during Wednesday’s session. It remains a reasonable assumption for traders to expect some form of BOJ open market intervention, as prices move toward the significant ¥152 level. However, caution should still be exercised due to the BOJ’s current monetary policy stance. Any further tightening of monetary policy lends itself to a strengthening of the Yen, as inflation controls remain a key area of contention for both analysts and policymakers, given that the central bank has failed to rule out future rate hikes.

Chinese equity markets benefitted from strong PMI releases on Sunday. Throughout March manufacturing PMI was recorded at 50.8, 0.7 points higher than analyst expectations. Meanwhile, services or non-manufacturing PMI figures were reported at 53, comfortably above estimates of 51.3. Data suggests a general strengthening of the Chinese economy, a positive signal for a nation which has faced significant challenges emerging from the Covid-19 pandemic. The Shanghai Stock Exchange Composite Index (¥SSE) only fell slightly by 0.18% from its Monday opening price, as despite wider market direction traders reinforced their support for Chinese equities.


What to Watch Next Week:

  • Monday 8th April
    -

  • Tuesday 9th April
    -

  • Wednesday 10th April
    US CPI (YoY)
    US CPI (MoM)
    US Crude Oil Inventories
    US Earnings:
    Delta Airlines ($DAL)

  • Thursday 11th April
    Chinese CPI (YoY)
    ECB rate decision
    ECB Monetary Policy Statement
    US PPI (MoM)

  • Friday 12th April
    UK GDP
    US Earnings:
    JP Morgan Chase & Co ($JPM)
    Wells Fargo & Company ($WFC)
    BlackRock ($BLK)
    Citigroup Inc ($C)


Sources:
https://uk.finance.yahoo.com/world-indices/
https://uk.finance.yahoo.com/commodities
https://www.londonstockexchange.com/indices/ftse-100
https://www.binance.com/en-GB/price/bitcoin
https://www.binance.com/en-GB/price/ethereum
https://qontigo.com/index/sxxp/
Stock Market Activity Today & Latest Stock Market Trends | Nasdaq
https://coinmarketcap.com/charts/#market-cap
https://www.forexfactory.com


Definitions:
YoY - Year on Year, or, Year over Year
MoM - Month on Month, or, Month over Month
QoQ - Quarter on Quarter, or, Quarter over Quarter
ECB - European Central Bank
BOJ - Bank of Japan
Fed - Federal Reserve
BOE - Bank of England
SNB - Swiss National Bank
DOJ - Department of Justice
PnL - Profit and Loss

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Daily Digest: Monday 8th April

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Daily Digest: Friday 5th April