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Trader Talk: An Analysis of the Markets

Asian markets opened the week slowly after a disappointing survey of China’s manufacturing sector weighed on hopes that the world’s second-largest economy would begin to stabilise in the second quarter. The China purchasing managers’ index from HSBC Holdings Plc and Markit Economics Ltd. was 48.1 in April, lower than the preliminary reading of 48.3 and missing the 48.4 projected by economists.

Indonesia’s economic growth missed analysts’ estimates in the first quarter after interest-rate increases last year curbed investment and a mineral-ore ban hurt the mining industry.

In Europe, problems in Ukraine persist after it sought to dislodge pro-Russian rebels from its eastern industrial heartland as violence threatens to loosen Kiev’s control of the regions. Russia is the world’s top palladium producer and is the fifth-biggest exporter for wheat, followed by Ukraine.

As for that jobs report in the US, the Labor Department said that the economy added 288,000 jobs in April, far better than the 205,000 jobs economists had predicted. The unemployment rate fell to 6.3% in April, down from 6.7% in March and beating the 6.6% forecast expected by economists. The dip in the unemployment rate was mostly due to fewer unemployed people entering the workforce. Still, the number of jobs added was impressive by other measures, with professional services, construction, and the food and beverage sectors showing strength.

In corporate news, banks are under the spotlight this week as Barclays, Credit Suisse and UBS will face questions about key banker departures, legal challenges and their efforts to boost profitability.

Barclays last week lost three top bankers in the US and Asia before a May 8 strategy announcement that will probably include shrinking the London-based firm’s investment bank. Credit Suisse, which holds a shareholder meeting May 9, is facing potential U.S. criminal charges over its role in helping Americans avoid paying taxes and UBS which has an investors meeting tomorrow, is falling short of profit goals.

Europe’s top banks are facing heightened scrutiny from shareholders, regulators and legal authorities after they’ve already lost market share in some investment banking businesses to U.S. competitors. Meanwhile key areas of Wall Street revenue are under pressure: JPMorgan, the biggest US bank, said last week that it expects trading revenue to drop about 20% this quarter from a year ago.

Good day and happy trading!

Kristian Camenzuli

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