US corporates’ Q1 earnings will determine the direction of US equities this week, with more than 150 earnings releases heard. The impact of a continually strong USD - in the first quarter of 2015 – will be of particular interest. It may influence margins and currency translation swings, especially to those who rely heavily on overseas businesses. To recap, US indices suffered a pull-back late February into early March, mostly on the back of weaker earnings reported by those corporates who reportedly missed estimates due to the effects of the strong USD in Q4 2014. Many will be interested in whether this recent history will repeat itself next week. The Dollar Index - or DXY - gained 5% in Q4 2014, then climbed a further 9% in Q1 2015. Looking at the charts, the US SPX 500 has stayed narrowly within the 2040-to-2120 range these past three months, languishing in the shadows of better performing European and Asian majors. Key US indices are mostly flat for the year to date, whilst major European and Asian stock indices are generally up by double digits. In some instances, such as the case of the Chinese CSI index, they are up by as much as 30%! Over the days ahead, key corporate results will be heard from Kimberly Clark, Coca Cola, Caterpillar Inc. and Microsoft, to name just a few worth following.
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