US Stocks Fall On Banking Sector Fears & Data Softness

It was a tough day for markets yesterday, with heavy losses seen across the board as banking sector fears and weak US data hit sentiment in stock markets. Shares in troubled lender First Republic fell around 50% after the bank reported a more than $100 billion drop in deposits over Q1, raising fresh fears over the health of the bank. FRC shares currently trade around $8, down from $122 on March 1st.

On the data front, US consumer confidence was seen falling to a nine-month low in April, reflecting the impact of still-high inflation and higher rates on consumers. The Richmond Fed manufacturing index was also seen falling last month, marking its 4th straight month of declines.

Key Factors for Today

- USD weaker as May rate hike pricing falls back
- US tech earnings came in strong – Facebook next
- Banking sector fears return
- Risk currencies lower in FX
- Further Aussie CPI falls keeps RBA expectations dovish

Market Movers

- Bitcoin bounces back to $28,400
- Gold testing $2000 resistance
- DXY hovering around $101
- AUDUSD testing $.66 support

Econ Calendar

- UK CBI Realised Sales (11am)
- US Durable Goods (1.30pm)
- EIA Crude Oil Inventories (3.30pm)

Earnings

- Facebook
- Boeing
- CME Group

Tech Giants Beat Earnings Forecast & Focus on AI Optimism

Despite the turn lower in stock indices yesterday, the major tech earnings on deck yesterday were at least positive. Both Alphabet and Microsoft beat earnings and revenues forecasts for Q1. Along with the better results, both companies struck an optimistic tone in their respective outlooks and were each keen to emphasise the expected positive impact of their continued AI development. With demand for AI products increasing steadily, both companies expected AI demand growth to be at the heart of revenue generation in the coming year. Today’s focus turns to Facebook as the next big tech name due to the report.

The US Dollar is seeing a little weakness across the European open on Wednesday. Interestingly, market pricing for the May FOMC has shifted lower to around 75% in favour of a .25% hike, down from around 90% a week ago. This shift suggests that a further rate hike is no longer fully priced in and with the Fed in its blackout period now ahead of the meeting, incoming data and US earnings will take on even greater importance, creating room for volatility should we see any downside prints.

In FX, the fall back in risk appetite has seen higher beta currencies such as AUD, CAD and NZD coming under selling pressure. Overnight, Aussie CPI was seen falling back to 6.3% YoY, down from 6.8% prior. With inflation falling steadily, the market expects the RBA to maintain its current pause in monetary policy, keeping AUD pressured against currencies where the respective central banks still hold hawkish expectations.