Tesla Earnings Miss Sours Risk Sentiment – Fed Beige Book Shows Economy Stalled

Another day of mixed US earnings and choppy market action on Wednesday it seems. On the plus side, Morgan Stanley came out with a strong set of results for Q1, helping further restore confidence in the banking sector. However, Tesla earnings came in weaker than expected with revenues falling short of expectations. Traders are still looking for the Fed to hike by a further 25bps next month. However, if the general tone to earnings takes a dive there is still room for this view to change. Today, attention turns to AT&T, Adobe and American Express which are among the big names due to report.

Key Factors for Today

- Fed beige book shows US economic activity stalled in recent weeks
- Fed’s Bowman and Waller to speak today
- Equities slip on mixed earnings results
- Light data sheet today

Market Movers

- Bitcoin back under $30k
- Gold back under $2000
- S&P stalled around $4150
- DXY still holding at $101 support

Econ Calendar

- US Unemployment Claims (1.30pm)
- BOC’s Macklem Speaks (4.30pm)
- Fed’s Bowman & Waller Speak (5pm & 8pm)

Earnings

- AT&T
- Adobe
- American Express

Bitcoin Surrenders Gains as Risk Sentiment Slips

The loss of upside momentum in risk assets has been well reflected in Bitcoin. The leading crypto asset has fallen by around 9% from last week’s highs amidst an uptick in uncertainty on weaker tech earnings. If we put together a string of good results in coming days from big names this should help revive demand. However, if earnings start to weaken, this might fuel a deeper drop.

In the equities space, indices are showing plenty of congestion as we move closer to the end of the week. The Nikkei is still holding above 28372.5 for now, though has corrected a little from earlier highs on the week. US stocks are mostly flat with the Nasdaq in a tight band of consolidation just under recent highs and the S&P still stalled around the 4150 mark.

Currently, focus has shifted back to Fed tightening expectations in the run up to the May FOMC. In its latest Beige Book update yesterday, the Fed noted that accessing credit in the economy had become much harder leading to a stalling of activity in recent weeks. Price levels were noted to have risen in recent weeks, though only modestly, while consumer spending was seen moderately lower.

In FX, risk currencies are seeing better demand today with AUD leading the pack across the European open. Flows look a little muted as traders await the next big directional cue. With little on the data front today focus will likely be on Fed’s Bowman and Waller who speak later along with Treasury Secretary Yellen.