Weekly Trading Update
Weekly Trading Update 14.04.2022
Week of April 18
Rising yields in anticipation of further monetary tightening keep markets under pressure. This week the focus should turn back to equities as Q1 earnings season gets underway.
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Week in Review
- Central banks continued tightening as expected, including a ‘double’ 50 bps hike from the Bank of Canada - in what is probably the beginning of the end of Canada’s housing bubble.
- US CPI rose 8.5% y/y and at the hottest pace since 1981 but core prices dipped, offering a glimmer of hope that inflation may be nearing its peak. The data confirmed expectations that the Fed's rate hike cycle will be among the most aggressive in memory. The S&P 500 slid to a 3-week low at 4390; 4500 is resistance.
- Earnings season unofficially started with major US banks reporting an increase in provisions in the face of geopolitical uncertainty.
- French President Macron got the most votes, heading to a run-off with Le Pen, in an expected repeat of the last election.
- Elon Musk offered to take Twitter private; TWTR stock spiked to $55, then dumped to $45.
- ECB kept policy unchanged, as expected. EUR/USD has support at $1.08, and major resistance at $1.10.
- The War in Ukraine is taking up less headlines but the only two Russian platinum and palladium accredited producers were suspended in London, pushing the metals prices away from their 200-day average
Top 3 events for the week ahead
Earnings season
The number of major companies reporting earnings is expected to increase dramatically next week, including trader favorites such as Tesla, Snap and Netflix. TSLA is below $1k again, SNAP nears its 50-day average at $36 and NFLX is setting itself up for a new low after missing $400.
Other firms reporting include JNJ, Rio Tinto, ASML, Heineken and Alcoa. Investors are expected to focus on cost pressures for firms, looking for which firms can successfully pass inflation on to consumers.
PMIs & inflation
Next week has a delayed start, with the UK off for Easter Monday. Then markets dig into a barrage of data, though the larger event is likely to be the release of flash PMI data from around the world. There is anticipation that purchasing managers might be less optimistic as higher prices take their toll. The EuroZone also publishes Q1 inflation figures. Focus on potential divergence in "fast" macro data like PMIs, with continental Europe more exposed to the economic impact from the war in Ukraine.
The IMF will also host its spring meeting, providing an opportunity for increased economic speak.
China
On Monday China will post retail sales and GDP figures for the first quarter, giving investors some insight into how the rolling lockdowns have affected the economy. Last week President Xi vowed to continue the "zero covid" policy despite increasing popular discontent. The latest trade numbers showed a dramatic slowdown in imports of raw materials, with potential for contagion across APAC as investors weigh how much longer covid restrictions will last and how they will impact the world's second largest economy.
Other data and events
The RBA will release its minutes from the last meeting on Tuesday, when US and Canadian housing data is also made available. Aussie bounced at 74c but the week before it was trading as high as 73c; Loonie reversed by the 200-100-50 MA cluster below $1.27; and dollar continues to record multi year highs above 126.00. New Zealand publishes Q1 CPI, the same day the EuroZone releases March harmonized CPI. Kiwi was dumped below 69c, with supports at 68c and 67c.
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