UK and Europe
European markets recovered from sharp early losses as strength in the basic resource sector following a fresh 2016 peak in oil prices unwound some of the dismay at no addition to stimulus from the Bank of Japan.
European markets suffered early losses, matching the weak sentiment in Japan where stocks slumped 4% and the yen rallied 3%. Further monetary easing from central banks was part of what was being baked into the rally. Central banks aren’t looking quite as helpful as they were a day ago; the Fed have kept the door from shutting on a June rate hike and the Bank of Japan have shied away from offering negative rates on bank loans.
Poor quarterly results from Lloyds (LON:LLOY) and another delay to the spin-off of Williams (NYSE:WSM) and Glyn by RBS (LON:RBS) sent banking shares lower on the FTSE 100. Mining shares were the biggest risers with Anglo American (LON:AAL) gaining over 5%.
Lloyds profits halved compared to the same period a year ago after it decided to buyback high yield bonds, though underlying profits did fall slightly to £2.1bn from £2.2bn. Given that net interest margin and income improved, capital reserves remained at a healthy 13% and there was no further provision for PPI claims, the initial drop in Lloyds proved to be an overreaction as shares rebounded.
US
US markets quickly erased opening losses, buoyed by a 10% jump in Facebook (NASDAQ:FB) shares and data showing a slowdown in US growth that reduced the likelihood of a rate hike in June.
The tech-laden Nasdaq got some reprieve from disappointment surrounding Apple (NASDAQ:AAPL), Alphabet (NASDAQ:GOOGL) and Twitter (NYSE:TWTR) quarterly results after Facebook easily topped earnings estimates.
People spending a high proportion of their online hours on Facebook has seen advertisers flood to the site at the expense of other online outlets. This trend is even more evident on mobile where monthly active users increased and now contribute 82% of total ad revenue.
Facebook shares gained over 10% just after the open, taking them to new all-time highs. The gains perhaps could have been more were it not for a proposal to create a new class of C-shares which will further erode shareholder voting power, placing more control with founder Mark Zuckerberg.
Shares of Ford (NYSE:F) jumped 3% after the auto-maker beat earnings estimates to report record profit margins.
FX
The movement in Thursday’s FX markets was concentrated within the Japanese yen and New Zealand dollar after both central banks chose to keep interest rates on hold.
The US dollar had been sold off heavily as the main counter currency to yen buying after disappointment at the Bank of Japan. So by the time US first quarter GDP disappointed expectations, downside in the dollar had largely run out of steam. US GDP rose 0.5% y/y in the first quarter, missing expectations of 0.7%, though that was to some extent offset by a higher GDP price index.
The yen rallied close to 400pips against the dollar, euro and British pound in response the Bank of Japan disappointing heightened expectations of a further cut to interest rates or an extension of quantitative easing. USD/JPY fell to 108, just above the lows reached earlier in the month.
A surprise turn into deflation on German monthly CPI figures saw the euro turn lower against the British pound. Spain has been in deflation for four months. The euro was flat in the face of a weaker dollar.
The New Zealand dollar saw big gains after the Reserve Bank of New Zealand maintained its overnight rate, surprising some who had been hoping for a rate cut.
Commodities
Gold jumped over $10 per oz after the weak GDP data reduced the already unlikely prospect of the Fed moving to hike rates in June after it left rates on hold in April and released a neutral policy statement.
Crude oil continued to make headway thanks to a weaker dollar and improved supply fundamentals after a report from the EIA showed US production fell for a seventh week to its lowest since October 2014.
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