Inspired by the knowledge that cheap money is here to stay, investors jumped back into US equities with vigour. Strong US data and impressive earnings helped calm the market which had been spooked by the Fed’s dovish surprise on Wednesday. Both the S&P and the Nasdaq hit 5 month highs, with optimism in the tech sector clear. Apple (NASDAQ:AAPL) led the charge advancing 3.7%, with investors looking eagerly ahead to the streaming service debut next week.
Asian markets followed the US higher hitting 6 ½ month highs overnight, meanwhile European bourses are pointing to a mixed start with the FTSE a noticeable decliner owing to the stronger pound.
Whilst the equity markets have been happy to bounce higher, signs of slowing growth fears can be found in the ever-reliable bond market. US Treasury yields have slumped to multi year lows reflecting the potential conclusion of monetary policy normalisation. The dollar was giving back yesterday’s gain, trading 0.18% lower versus a basket of currencies after shooting 0,6% higher on Wednesday.
Eurozone PMI’s in focus
The weaker dollar was offering support to the euro as investors look towards eurozone pmi data to assess the prospects of slowing growth there. A slew of data will give investors further clues as to how the eurozone economy and particularly the German economy are holding up in the face of Brexit and the unresolved US – Sino trade dispute. Manufacturing activity in both Germany and the eurozone is expected to remain in contraction territory, albeit slightly improved from February.
The EUR/USD has rebounded off $1.1340, pushing higher before consolidating in the region of $1.1370. An improvement in pmi’s could see the EUR extend gains and push towards $1.14.
Crude eases from YTD high
Global growth concerns can also be seen in the oil market on Friday. Crude pulled back from 2019’s peak of $60.39, as traders pressed pause on the three-month rally supported by continued OPEC output cuts and sanctions on Venezuela and Iran. The fear is that slowing growth will dent fuel consumption. However, oil prices remain well supported by OPEC and we don’t see that changing anytime soon. When the oil cartel meets in June, we expect they will extend the cuts across the rest of the year.
Brexit update
The pound bounced off support at $1.30 and has continued to move higher after the UK narrowly avoided an imminent no deal Brexit. The EU granted Theresa May an extension of two weeks to work out what to do. Theresa May now has to 12th April to decide whether to leave with a no deal or to request a longer extension. Once again, we are likely to see Eurosceptics threatened with the idea of a long extension if they don’t support her deal. As the UK moves back from the brink, the pound is moving higher.
Opening calls
FTSE to open 19 points lower at 7334
DAX to open flat at 11550
CAC to open 12 points higher at 5390
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