Dollar Hits Five-Month High, Goldman Tops Estimates

Equities

On Monday, the UK's FTSE 100 index declined by 0.5%, affected by losses in significant energy stocks and precious metal miners. Despite nearing record-high levels on Friday, the resources-heavy index couldn't maintain its momentum, with precious metal miners experiencing a substantial 5.2% drop. Meanwhile, oil and gas shares dipped by 1.8%, tracking lower crude prices amid a reduction in risk premiums following Iran's weekend attacks on Israel. However, BAE Systems offered some resilience within the aerospace and defence sector, with its shares rising by 1.4% amidst the increasing tensions.

Superdry saw a significant 5.9% drop in its stock price as the fashion chain announced advanced stages of a restructuring plan expected to launch soon. Additionally, PageGroup suffered a 9.1% decline after disclosing a nearly 13% fall in first-quarter group gross profit, a reflection of slow hiring across major markets. Conversely, Mitie Group outperformed, climbing 6.6% as the outsourcer announced a new share buyback programme.

Across the pond, the US stock market also faced a downturn, with the S&P 500 losing 1.20% to close at 5,061.82, influenced by rising Treasury yields and ongoing concerns over geopolitical issues between Iran and Israel. The Nasdaq Composite experienced a sharper decline of 1.79%, ending the day at 15,885.02.

Goldman Sachs rose by 2.92% after reporting first-quarter earnings that surpassed Wall Street expectations, driven by a rebound in underwriting, deals, and bond trading. Conversely, Tesla's shares fell by 5.6% following news of more than 10% workforce reductions. Additionally, Salesforce stumbled by 7.28% amid reports of its advanced talks to acquire Informatica, impacting its market position negatively.

Apple also contributed to the downturn, with a 2.19% fall after reports showed a significant drop in its smartphone shipments for the first quarter of 2024.

Market activities were further characterised by a higher number of declining issues compared to advancing ones on both the NYSE and Nasdaq, demonstrating a broader market retreat amid uncertain economic and geopolitical conditions.

Forex & Commodities

The US dollar strengthened significantly, reaching its highest level since early November against a basket of currencies, following unexpectedly strong US retail sales data for March. The sales increased by 0.7% last month, with a revision for February showing a rise of 0.9%, exceeding initial reports. This robust economic indicator has led investors to adjust their expectations regarding the Federal Reserve's monetary policy, now anticipating fewer rate cuts this year. As a result, the dollar index ascended to 106.23, marking a notable upturn.

Meanwhile, the Japanese yen fell to its weakest position since 1990 against the dollar, driven down by the stark interest rate differential between Japan and the United States. Japanese financial authorities have expressed readiness to intervene in the currency market, if necessary, especially if the yen's performance deteriorates significantly relative to the dollar.

In Europe, the euro dropped to its lowest since November, influenced by the European Central Bank's openness to potential rate cuts as soon as June, following weak performance indicators. This move contrasts starkly with the Fed's more cautious stance on rate adjustments.

In commodity markets, gold's price movements reflected geopolitical tensions and market uncertainty, with spot gold reaching $2,365.09 per ounce, having hit a record high the previous Friday. Despite the dollar's strength, gold retained its appeal as a safe-haven asset amidst ongoing Middle East tensions.

Oil prices also saw notable movements, with Brent futures rising to $90.58 a barrel and US crude to $85.90, supported by stronger-than-expected economic growth in China, the world's largest oil importer. However, geopolitical concerns following recent escalations in the Middle East also played a significant role in the price dynamics, with potential impacts from regional conflicts keeping markets attentive.