Spreadex Market Update
Better US Earnings Season Sees Both Stocks & USD Gaining
Stocks were broadly higher yesterday as traders reacted to better US earnings news. Signs of stronger-than-expected performance in Q1 are helping offset recessionary fears for now, leading US stocks higher. This is translating into better performance for global asset prices however, a simultaneous rise in USD begs the question, which is going to stay the course? With rate hike bets for May rising and traders now starting to look towards a further Fed hike in June, stock traders are walking a fine line. Today, traders look to the latest big names to report Q1 earnings with Netflix, Goldman Sachs and Boeing among those reporting.
Key Factors for Today
- USD supported by hawkish Fed expectations
- Markets rally on better US earnings – offsetting recession concerns
- China GDP beat helps lift risk sentiment
- RBA still willing to tighten if needed – RBA minutes
- UK wages jump, feeding hawkish BOE outlook
Market Movers
- S&P back above 4150
- Nikkei breaks 28372.5
- AUDUSD back above 0.67
- GBPUSD back above 1.24
- XAUUSD holding on 2000 as support
Econ Calendar
- German ZEW Economic Sentiment (10am)
- Eurozone Trade Balance (10am)
- Canadian CPI (1.30pm)
Earnings
- Goldman Sachs
- Netflix
- Boeing
Stock Markets Rallying On Strong US Earnings
Risk sentiment has received a further lift on Tuesday from better China data overnight. China quarterly GDP was seen rising to 4.5% up from 2.9% prior, above the 4% the market was looking for. Evidence of the post-pandemic recovery gathering pace are a welcome sign and are helping keep equities underpinned for now despite yields creeping higher on hawkish Fed expectations.
The FTSE is trading above 7390 currently, after printing a seventh consecutive bullish day yesterday. DAX, meanwhile, is holding 15715 highs as the breakout sustains for now. The Nikkei is the big winner so far today, the index is breaking out further above the 28372.5 level, bolstered by better China data and a falling Yen. The S&P, meanwhile, is testing above the 4150 mark once again as bulls keep their eyes on the YTD highs
The latest RBA meeting minutes overnight were a little more hawkish than many were expecting. While the RBA paused its tightening program last time around, the minutes showed the RBA to be in favour of further tightening if necessary, with inflation still at elevated levels. AUD has been firmer on the back of the minutes, boosted too by the broad pickup in risk appetite which is also helping lift demand.
JPY has been among the weakest currencies across the European open on Tuesday. A better tone to the risk backdrop is seeing reduced safe-haven demand for the Yen. Commenting this morning, BOJ’s Uchida warned ahead of next week’s BOJ meeting that financial constraints will not stop the central bank from carrying out its monetary policy operations effectively.
GBP has been a strong performance today. The latest UK labour market data today showed the unemployment rate ticking up to 3.8% from 3.7% prior. However, the big focus was the jump in wages which to 5.9% from 5.7% prior, well above the 5.1% the market was looking for. The data suggests that the BOE’s inflation fight is far from over and keeps the focus on further BOE tightening near-term.
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