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Top 5 Things to Know in the Market on Tuesday

EconomyApr 17, 2018 05:56AM ET
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© Reuters. 5 key factors for the markets on Tuesday - Here are the top five things you need to know in financial markets on Tuesday, April 17:

1. Netflix surges as stocks focus on earnings

Shares of Netflix (NASDAQ:NFLX) surged more than 7% in pre-market trade on Tuesday after the online streaming service smashed expectations for new subscribers.

With geopolitical tensions fading into the background, market participants turned their attention towards corporate reports. In a busy week for earnings, 71% of the 35 S&P firms that have already released corporate numbers for the first three months of the year beat profit estimates, while 80% have topped consensus with sales.

In focus on Tuesday, Goldman Sachs (NYSE:GS), Johnson & Johnson (NYSE:JNJ) and UnitedHealth (NYSE:UNH) will report before the opening bell, while IBM (NYSE:IBM) will release its numbers after the market close.

While waiting for the reports, U.S. futures pointed to a higher open on Tuesday. At 5:53AM ET (9:53GMT), the blue-chip Dow futures gained 120 points, or 0.48%, S&P 500 futures advanced 11 points, or 0.39%, while the Nasdaq 100 futures traded up 26 points, or 0.38%.

2. Pound pulls back from post-Brexit high after UK jobs data

The pound pulled back from its highest level since the Brexit vote when the UK voted to leave the European Union after employment data released Tuesday.

Average earnings excluding bonuses picked up as expected to register a 2.8% rise from the previous month’s 2.6% increase. The reading topped inflation that had seen a 2.7% annualized gain in February, meaning that workers are finally enjoying pay growth that tops price increases, putting an end to months of a pay squeeze in the UK.

Wage inflation had been one of the pieces missing from the puzzle and its slight acceleration may pave the way for the Bank of England to hike interest rates to 0.75% from the current 0.50% in May.

Cable hit an intraday high of 1.4377 earlier on Tuesday but later turned around, heading into negative territory. GBP/USD was last off 0.13% at 1.4319.

Although the BoE is widely expected to hike rates next month, traders may have taken the fact that average earnings including bonuses held steady at 2.8% as a sign that pressure on the BoE to tighten more aggressively is not as strong as feared.

3. Dollar holds near 3-week low; data and Fed speakers on tap

The dollar took a breather in early morning trade on Tuesday, hovering near a 3-week low hit overnight. The greenback had come under pressure a day earlier after U.S. President Donald Trump accused Russia and China of devaluing their currencies in a Twitter post.

China's foreign ministry said on Tuesday that information coming out of United States regarding the Chinese currency is “a bit chaotic,” as Trump’s own comments served to put downward pressure on the dollar.

Forex traders will have references to digest later in the session with housing data -housing starts and building permits- out at 8:30AM ET (12:30GMT) followed by industrial production at 10:00AM ET (14:00GMT).

Markets will also pay attention to a downpour of appearances by Federal Reserve policy makers on Tuesday. Although Fed governor Randal Quarles will testify to Congress on banking regulation, investors will watch appearances from fellow Fed members John Williams, Patrick Harker, Charles Evans and Raphael Bostic for clues on the future path of interest rates.

4. China posts strong Q1 growth, shows some weakness

China allowed markets to breathe a sigh of relief on Tuesday as the world’s second largest economy posted first quarter growth of 6.8%, buoyed by strong consumer demand, healthy exports and robust property investment.

Consumption, which accounted for almost 80 percent of economic growth in the first quarter, played a significant role in supporting the economy even as risks grew for Chinese exporters. Retail sales grew by a healthy 10.1% in March.

However, there was some concern as industrial production missed estimates.

Overall, economists still expect China will lose some momentum in coming quarters as Beijing forces local governments to scale back infrastructure projects to contain their debt, and as property sales cool further due to strict government controls on purchases to fight speculation

5. Oil prices slip ahead of U.S. inventories

Oil prices registered slight losses on Tuesday as investors looked ahead to fresh data on U.S. commercial crude inventories to gauge the strength of demand in the world’s largest oil consumer and how fast output levels will continue to rise.

Industry group the American Petroleum Institute is due to release its weekly report at 4:30PM ET (20:30GMT). Official data from the Energy Information Administration will be released Wednesday, amid forecasts for an oil-stock drop of around 1.9 million barrels.

Oil ended lower on Monday, giving back some of last week’s sharp gains, as concerns over tensions in the Middle East waned with investors taking the view that Western-led strikes on Syria were a one-off intervention.

U.S. crude oil futures fell 0.12% to $66.14 at 5:55AM ET (9:55GMT), while Brent oil lost 0.17% at $71.30.

Top 5 Things to Know in the Market on Tuesday

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