A 'bumper' Q1 is a certainty rather than an assumption by now, as evidenced by a raft of positive pre-announcements and the first batch of results that – in general – has eclipsed even the most demanding expectations. Sure, there will be accidents (supply chain bottlenecks, execution issues, unexciting guidance), but in general, I guess the issue is that a high bar has been raised even further; the question is now where do we go from here? And parsing various Bank commentary, "Rangebound" and " Priced to Perfection" seems to be a common theme.
The turn lower in technology stocks seemed to coincide with a pullback in the new Coinbase (NASDAQ:COIN) direct listing, which at one point valued the cryptocurrency exchange at around $112bn and tends to make sense as the pros likely had a field day on that one as retail investors chasing a payday felt the harsh reality of trading a Wall St Tech bubbly IPO.
There is a theory that when the management of an industry leader decides to cash out via an IPO, it's a signal that the proverbial juice has been entirely squeezed. Insiders that see exponential upside are happy to wait. When they see diminished upside relative to risk, they monetize their stake.
Russian Assets Lower On Sanction Fears
The Biden administration will impose sanctions against Russia on Thursday via executive order, the Wall Street Journal reported, citing people familiar with the matter, WSJ reported. This punishment is in response to election interference, role in the SolarWinds hack and allegations that Moscow offered to pay bounties to militants in Afghanistan to kill US soldiers, the report says. The measure will expand existing prohibitions on US banks trading in Russian government debt. RUB is down 1.5% and equities down 2% at the open. This could support gold markets amid the dovish Fed narrative and strong hands demand in Asia.
Forex
USD/INR spot opened at 75.18 and climbed up to 75.34 with many covid cases spooking the market. There looked to be some good selling pressure from locals, but it was not as aggressive as in recent times.
As for G-10, there was some short dollar covering in Aisa, possibly ahead of US Retail Sales data.
The drift lower in global yields suggests bond markets are buying into the idea of relatively inflation-free economic growth. A stronger-than-expected US CPI report for March triggered lower UST yields, a rally in equities, and broad-based USD weakness. US retail sales at 0830 EST is yet another keen litmus test where an above-consensus view is now starting to gain some momentum. Another mild reaction in yields would suggest that a growth tantrum is not on the cards anytime soon. However, the opposite could also come true, entering some doubt into the equation.
However, ultimately Fed policy continues to weigh down the dollar. New York Fed President Williams (voter) was dovish, saying the economy won't be back to full strength until the pandemic is over. Williams (NYSE:WMB) said it's a race between vaccinations and new variants of the virus at the moment. He noted that as things stand, the economy remains far from maximum employment.
According to a CBI and PWC report, UK financial services companies are regaining confidence in the economy faster in more than seven years. Although business volumes have inevitably stalled, business leaders remain optimistic that the UK's vaccination program will help the economy rebound this summer, the Times reports. GBP price action remains choppy. Sterling is consolidating further with decent supply reemerging.
The daily selling pressure on AUD/USD from earlier this week seemed to pause Wednesday. AUD played catchup with the broader USD weakness bolstered by buoyant risk sentiment. This morning, the pair extended gains to just shy of the 0.7750 resistance following another strong employment print before some supply emerged, with the USD catching a bid once again.
Oil Markets
Oil surged on news of a large draw in products stocks. In the latest week, crude stocks dropped 5.9 mln barrels against forecasts for a 2.9 mln draw. Distillate stocks down 2.1 mln vs predictions for one mln build. And the weaker US dollar confirming oil trading is open for business again.
A truly bullish oil report from the US, according to the headline numbers. The US oil complex once again seems to be moving in the right direction with a sizeable oil draw, a much smaller than expected gasoline build and finally a draw in distillates again. Indeed, this speaks volumes about the US demand recovery and inventories getting siphoned thanks to OPEC+ supply curtailments.
Both gasoline and jet fuel were up 76% and 193% y/y, respectively, with the latter potentially the keen lift-off signal.
With airports getting busy and more and more planes in the sky again, it suggests the oil demand is getting closer to taking the next giant recovery step.
India's Single-Day Covid Case Count Topping 200,000 could provide a headwind, but so far, the market is hardly spooked, deferring to the bullish product draws in the US inventory report.
India had 200,739 new coronavirus cases in a single day, taking the total number of infections to 14.07 million, according to data released by the federal health ministry, Bloomberg reports, adding that deaths rose by 1,038 to 173,123.