It’s been quite a mixed start to the week for the markets, with Asia offering little direction overnight having recovered late on following a tough start, Europe coming under pressure early in the session and U.S. futures pointing slightly higher.
The standout event this week will of course be the release of the FOMC minutes from the April meeting on Wednesdayevening, despite the fact that markets remain absolutely convinced that June is not a “live” meeting. An impressive retail sales report on Friday did nothing to convince investors otherwise and in fact, the implied probability of a rate hike based on Fed Funds futures fell from 8% to 4%.
The end of April ushers in a more fraught period after the firm early quarter investment inflows and quarterly corporate earnings report responses. It is no secret that 70% of all corporate earnings reports beat estimates each quarter regardless of economic conditions. That is due to downbeat original estimates, where earnings reports are then predictably a bit better than expected. The Q1 2016 reports have been very typical in that regard.