Stock Markets Recover As Weak US GDP Cuts Fed Tightening Expectations Beyond May

After heavy sales across the first half of the week, global stock markets saw a fresh wave of demand yesterday as traders digested the latest US GDP data. Advance Q1 GDP came in well below expectations at 1.1% vs 2% expected. Marking a sharp slowing of activity from the prior quarter’s 2.6% reading, the data has added to concerns that the US economy is headed for recession later in the year. While expectations for a further .25% hike from the Fed next week have not been impacted, the market is certainly expecting a less hawkish outlook from the Fed with rate hike projections beyond May falling sharply. Attention now shifts to today’s core PCE data and employment cost index data.

Key Factors for Today

• US PCE on watch after GDP disappointment
• BOJ keeps rates on hold – orders review of monetary policy
• Stocks higher on strong earnings – energy companies due today

Market Movers

• S&P jumps 2%
• Nikkei breaks out to fresh YTD highs
• EURUSD falls back under $1.10
• Bitcoin testing $30,000

Econ Calendar

• US Core PCE (1.30pm)
• US Employment Cost Index (1.30pm)
• CAD GDP (1.30pm)

Earnings

• Exxon Mobil
• Chevron
• Sony

Tech Stocks Hold Up as Meta Beats Forecasts

Stocks were also lifted yesterday by some further positive results from US earnings season. Tech titan Amazon beat Q1 estimates with EPS of $0.31 vs $0.21 expected on revenues of $127.358 billion vs $124.603 billion expected. Further strong performance was seen from Mastercard which posted Q1 EPS of $2.80 vs $2.71 expected on revenues of $5.748 billion vs $5.643 billion expected.

Stock indices were seen higher across the board yesterday. The S&P recorded a 2% gain, marking its largest daily gain since January while the Nikkei was seen breaking out to fresh highs on the year across the European open today. The Nasdaq also traded up to fresh 2023 highs yesterday though is looking a little softer at the open today.

Despite the strong moves seen in equities markets, gold and silver prices remain muted into the end of the week. Both metals are still sitting down from recent highs though downside momentum has dried up suggesting that a recovery higher might still be seen in the near-term.

In FX, JPY has been the weakest performer across early European trading on Friday. The improvement in risk appetite since yesterday has seen a sharp weakening of safe haven demand for the Yen. The Bank of Japan meeting earlier this morning saw the BOJ holding rates unchanged while committing to a review of its current monetary. Some players suggest such a review should lay the groundwork for a move away from ultra-loose policy, noting that the bank removed its pledge to keep rates at “current or lower levels”.  While JPY was seen higher initially on the back of the meeting, those moves have since reversed with the Yen losing ground now.