Stock Market Analysis
In May Stock market indices continue to regain positions, despite escalating confrontation between the USA and China and the growing number of confirmed cases of coronavirus worldwide. A number of factors contribute to the growth of stock markets.
In particular, gradual lifting of lockdown restrictions and the restoration of economic activity, an expectation of additional economic support measures, and progress in the development of a coronavirus vaccine. On Monday, biotechnological company Moderna announced the successful completion of the first phase of the vaccine trial, which caused stock market growth.
Escalation of tensions between the USA and China poses a threat to the steady growth of the stock market. Protests resumed in Hong Kong over the intention of the Chinese government to pass a national security law that, allegedly, would limit Hong Kong’s autonomy. The Trump administration has responded by blacklisting 33 Chinese companies that are accused of human rights violations.
Main events of the current week
- On Tuesday, data on new home sales in the United States will be presented. Governor of the Bank of Canada Stephen Poloz will speak as well.
- On Wednesday, ECB President Christine Lagarde will deliver a speech.
- On Thursday, a number of US macroeconomic indicators will be published, in particular, data on GDP, durable goods orders, and jobless claims. Data on crude oil inventories will be presented as well.
- On Friday, data on GDP in Canada and the consumer price index in the eurozone will be presented. Fed Chairman Jerome Powell will deliver a speech.
Corporate earnings reports
- Hewlett Packard will present a quarterly report on May 27 after the market close. The outbreak of the coronavirus pandemic had a negative impact on the company’s performance in the first quarter. Lockdown measures taken to limit the spread of coronavirus in China, the world’s largest PC manufacturer, caused significant production delays, as well as create problems with logistics and human resources, which led to a global reduction in PC supplies. The extended closure of factories in China in February and the slow resumption of production by the end of the quarter led to a reduction in PC supplies. Hewlett Packard’s market share, which ranks second in terms of PC sales, fell from 23.3% to 21.8%.
- Dell will report earnings on May 28 after the market close. All leading PC makers experienced declining sales in the first quarter, except Dell. Dell was the only major PC maker to increase sales by 1.1% in the first quarter. Dell shipments rose to 10.5 million, while its market share increased from 17.8% to 19.6%. In January, Dell unveiled its new line of laptops, displays, and software featuring 5G, artificial intelligence, and innovative designs.
- Canopy will release a quarterly report on May 29 before the market open. Despite the imposition of lockdown restrictions in Canada and the USA, cannabis stores remained open, selling through physical stores, online orders, or delivery services. As governments imposed lockdown measures in March, demand for cannabis increased as consumers of medical marijuana stocked up on prescriptions. There has also been an increase in demand for recreational marijuana.