European equity markets suffered a broad based sell-off yesterday as heavyweight sectors like banking, mining, housebuilding and car manufacturing all posted declines.
Earnings reports from Barclays and Taylor Wimpey in the UK set the tone for the London market yesterday. RBS will be in play today as the bank is set to reveal its first-quarter results, but the numbers might be overshadowed by the news that the CEO Ross McEwan is stepping down.
The reporting season continues in the US and the likes of Microsoft and Facebook helped the tech-focused NASDAQ 100, while disappointing numbers from 3M weighed on the Dow Jones. There was a jump in volatility in the index futures market as Amazon and Intel reported their latest numbers after the closing bell. Amazon’s first-quarter earnings more than doubled, smashing forecasts, while Intel cut its guidance, which sent the shares tumbling post-market.
Stocks in Asia largely traded lower overnight as traders took their cues from Wall Street. China’s Xi confirmed the country won’t use currency devaluation for economic gain, and he stated it will engage in macroeconomic coordination with other nations.
US first-quarter GDP will be announced at 1.30pm (UK time), and economists are expecting a reading of 2.1%. The figure will be closely watched as the Federal Reserve lowered its growth forecast for 2019 to 2.1%, from the 2.3% projection in December. The US central bank have dropped a big hint that interest rates are likely to hold steady for the foreseeable future, but they have also given themselves the wiggle room for a hike, should the economy outperform.
The latest durable goods figures from the US were impressive; the headline figure showed 2.7% growth in March, which was an impressive rebound from the 1.1% drop in February. The reading that excludes transport was less bullish, but solid nonetheless, as it showed 0.4% growth. It is encouraging to see that consumers are keen to spend. The jobless claims rate jumped to 230,000 from 193,000 – which was its lowest since 1969. The sudden jump wasn’t welcomed, but the labour market is still in rude health.
The US dollar saw some volatility yesterday and the currency is in high demand as it hit a fresh 23-month high, and conversely the euro is feeling the pain of the US dollar rally. Currency traders are flocking to the perceived safety of the US dollar as the economic problems of the eurozone continue to play out. The Fed seem content to sit on their hands, but other central banks are move dovish than the Fed these days, so the dollar is likely to remain relatively strong. Gold continues to be at the mercy of the US dollar, and the commodity grind lower for the past two months hasn’t gone unnoticed.
French consumer confidence will be released at 7.45am (UK time), and traders are expecting a reading of 97, which would be an improvement on the 96 that was recorded in March.
EUR/USD – has been broadly pushing lower since early January, and if the negative move continues it might retest the 1.1110 area. Resistance might be found at 1.3220.
GBP/USD – has been driving higher since early December, but has recently slipped below the 200-day moving average at 1.2968, and if it holds below that metric, it might retest the 1.2775 region. A rally might target the 1.3380 area.
EUR/GBP – while its holds below the 200-day moving average at 0.8822, its outlook is likely to be negative. 0.8471 might act as support. A rally might encounter resistance at 0.8800.
USD/JPY – has been largely been pushing higher throughout 2019, and a break above the 112.00 area, might bring 113.70 into play. 111.23 – 50-day moving average, might provide support.