Morning Fundamentals: US Equities Rise, EUR/USD Drifts Lower

A false post on the Twitter account of the Associated Press that said that there had been explosions at the White House and that President Barak Obama had been injured caused the S&P 500 to plunge more than 1% in a matter of two minutes before the news service announced that its account had been hacked. The fall did not trigger any of the circuit breakers built into the trading systems. Shares for most companies are placed on a trading halt for 5 minutes if they lose more than 10% in five minutes. The Dow Jones Industrials dropped more than 140 points before recovering. The event has concerned many market observers who believe that algorithmic trading programmes may have exacerbated the impact of the false news.

Apple shares have recorded a fall in profit for the first time in a decade last quarter as forecast sales missed analysts' predictions but announced a $55 billion payment to shareholders to compensate stock holders for a share price that has been smashed in recent months. Although the share price rose in response to the news there is still concern from investors about slowing growth and narrowing margins. Apple predicted that sales for the current period will be between $33.5 to $35.5 billion compared to average analysts expectations of $38.4 billion.

Despite the drama surrounding the false report of explosions at the White House, U.S. equities managed to rise on reports of better than expected earnings from Travelers and Netflix. Netflix climbed a massive 25% after it announced better than expected subscriber numbers. Bank of America rose more than 3% after a buy recommendation from Morgan Stanley. The S&P 500 has closed 1.04% higher at 1,578.78. Earlier in Europe, bourses recorded strong gains with the EURO STOXX 50 gaining more than 3%.


EUR/USD drifted lower on the results of the Chinese HSBC PMI during the Asia time zone but what was to come was unexpected after the slow start to the week on the volatility front. German PMI numbers came in below the expected and with the chatter of the last couple of days about a continuation of the ECB’s easing policy, the price took a bit of a hit on the release. Euro fell from 1.3060 to 1.2975 on the run as expectations are now building that the ECB will cut rates next week. The price remained around the 1.2980 level until the US session opened and as improved New Housing numbers and improving commodity prices rose the Euro followed the equity markets higher.

However, the earlier falls couldn’t be regained as the price closed the day on the 1.3000 handle. The bearish tone should remain with expectations about the ECB easing likely to build between now and the release. Whilst its hard to believe they will cut after such a long period at 0.75% we believe its still an outside chance at best.

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NEUTRAL BEARISH
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AUD/USD moved lower yet again with the weakness of the Flash PMI numbers released out of China but continued buying between 1.0200- 20 stopped the decline during the middle of the Asia session. The afternoon saw little action and as a result the price drifted higher as the commodity markets seemed to gain despite the weaker than expected result. The slow and steady climb has the pair ending the US session at 1.0267 but all in all the pair has hardly done anything of the past two sessions and has been quite a bore. Australia is getting its first piece of important data for the week with CPI q/q to be released at 11.30am local time.

Expectations are for the quarter to rise by 0.7% from the last reading of 0.2%. Expected drive in post Xmas sales and a general lift in living cost likely to be the result. However, we are leaning towards a lower number towards 0.4-0.5%. Talk of range traders looking for a pop to 1.0290 to sell into seems to be capping the market but its about a wait and see. Anzac Day tomorrow, Lest we Forget!

Compass Direction
Short-Term Medium-Term
NEUTRAL BEARISH
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