- Europe, U.S. futures post modest gains after downbeat Asian session
- U.S. indices hit fresh records on bullish earnings
- Oil slips from 6 month highs amid inventory build, post-Iran ban expectations
- Pound wavers on new lawmakers' offensive against PM May's leadership
Key Events
Europe's STOXX 600 and futures on the S&P 500, Dow and NASDAQ 100 arduously crawled above neutral levels this morning after Asian stocks failed to build on yesterday's record-breaking U.S. session, amid a lack of significant catalysts.
Japan’s Nikkei (-0.35%) and South Korea’s KOSPI (-0.88%) slid alongside Hong Kong’s Hang Seng (-0.53%), while China’s Shanghai Composite (+0.09%) managed to climb into green territory. Australian equities (+0.99%) outperformed their regional peers after disappointing figures on consumer price growth stoked bets on future curbs on interest rates, pulling down the Aussie and thereby bolstering the competitiveness of domestic assets.
Global Financial Affairs
On Tuesday, some solid earnings reports pushed the S&P 500 and the NASDAQ Composite to fresh records.
The tech-heavy index jumped 1.32% to post a fresh record close as well as an intraday high—only 0.05% below its record high.
The S&P 500 rose 0.88%, building on an earnings-beat rally led by the biggest technology and media firms—including Twitter (NYSE:TWTR)—as well as by consumer names such as Coca-Cola (NYSE:KO) and Hasbro (NASDAQ:HAS). Technically, the price of the benchmark index hit a fresh record close but has yet to register a new all-time high.
Nine out of the 11 SPX sectors closed in the green, with only defensive stocks in Consumer Staples (-0.32%) and Energy (-0.16%) declining. The latter suffered from volatility in the oil market, which is generating an unpredictable environment for companies operating in the sector. With China defiant against U.S. sanctions on Iranian oil and Russia keen on releasing more barrels onto the market, analysts including Goldman Sachs' researchers remain skeptical that the renewed restrictions will have any meaningful impact on prices, as they expect OPEC+ oil producers to halt their output cuts and replenish any possible supply vacuum.
The Dow Jones Industrial Average added 0.55%, closing 0.63% below its record close.
Finally, the Russell 2000 beat its peers, surging 1.57%. Technically, however, the small-cap benchmark posted the weakest picture among U.S. majors, as it closed below the April congestion, which stands below the March range and almost 10% lower than its record price.
Meanwhile, yields on 10-year Treasurys fell below an uptrend line since March 28, confirming last Wednesday’s shooting star, after a completion of a December-March symmetrical triangle. The downside uptrend line breakout points to an end of the return move to the bearish pattern.
The dollar climbed for a second day, after penetrating the upper boundary of a symmetrical triangle yesterday, suggesting further rallies.
In the U.K., the pound wavered after extending a decline to a seventh consecutive session, as Prime Minister Theresa May faced a renewed challenge to her leadership from Conservative MPs. Technically, the British currency still holds the path to a H&S bottom.
Oil dropped after three days of gains, pressured by a report of rising stockpiles from the International Energy Agency. Tuesday’s shooting star gave traders a heads up for a supply onslaught, at the same levels of most of last year’s price congestion. Technically, a correction is due as a return move.
Up Ahead
- The Bank of Japan, Bank of Canada, Bank of Russia, Sweden’s Riksbank and Bank of Indonesia all set monetary policy this week.
- Germany’s IFO data is released on Wednesday.
- Japan’s Prime Minister Shinzo Abe meets leaders from the European Union on Thursday before flying to the U.S. for a summit with President Donald Trump.
- The initial print of first-quarter U.S. GDP will be closely watched on Friday for clues as to how the economy responded to the government shutdown and to the fourth-quarter market rout.
Earnings
- Microsoft (NASDAQ:MSFT) reports results after market close on Wednesday, with an EPS of $1, from the $0.95 it posted last year.
- Facebook (NASDAQ:FB) is expected to release earnings after market close today, with a $1.65 EPS, slightly lower than the $1.69 it posted last year. Despite a 40% rally year-to-date, some analysts pointed out shares of the social media giant still look cheap when compared to last year, thereby providing a palatable opportunity.
- Tesla (NASDAQ:TSLA) also reports its financial results after market close today, with consensus estimates for revenue of $5.77 billion and a loss of $0.87 per share. Some analysts believe production and delivery numbers will give a much better indication of the stock's state of health than the company's own earnings statement.
- Amazon (NASDAQ:AMZN) is due to report earnings after market close on Thursday, with a $4.61 EPS forecast, from $3.27 last year.
- European bank earnings kick into full gear with reports from Deutsche Bank (DE:DBKGn), UBS (SIX:UBSG), Barclays (LON:BARC), Credit Suisse (SIX:CSGN) and Swedbank (ST:SWEDa).
Market Moves
Stocks
- The MSCI Asia Pacific Index climbed 0.2%.
- Japan's Topix fell 0.67%.
Currencies
- The Dollar Index advanced 0.2%.
- The euro slipped 0.1% to $1.1214.
- The yen was little changed at 111.81 per dollar.
- The offshore yuan was flat at 6.7275 per dollar.
- The British pound hovered around $1.2934.
Bonds
- The yield on 10-year Treasurys fell more than one basis point to 2.55%.
Commodities
- West Texas oil slid 0.5% to $65.97 a barrel.
- Gold dropped 0.2% to $1,269.93 an ounce.