ndices in Europe and the US have turned lower today, unable to build on overnight strength in Asia Pacific markets as a number of developments have thrown up headwinds. In Europe, the question of whether Greece can remain in the Eurozone has moved back to front and centre with its treasury yield jumping back up above 12% following yesterday’s downgrade of its debt and ongoing rumours and denials related to whether or not it can meet upcoming debt repayments, and if it could be forced to leave the Eurozone in the coming months. Adding to this uncertainty is the continuing UK election campaign which could lead to a UK referendum on leaving the EU. The FTSE
is down 0.3% today while the Dax is down 1.6%.
US markets have also turned downward once again, a shortfall in housing starts this morning has added to the pile of evidence indicating March was a weak month and because of this, interest rate liftoff may be put off until later in the year to give the Fed time to see if this is a one-off weather related event or the start of a more serious weakening.
US indices have been falling this morning after last night’s results from Netflix and Sandisk highlighted a key risk currently facing traders this earnings season; that the major gains in USD over the last year could drag on corporate earnings particularly for multinationals. Although strong subscriber growth propelled Netlflix’s share to new all-time highs in aftermarket trading last night, companies in slower growth areas could face problems as overseas earnings are translated back to USD in smaller amounts. Expectations of slower earnings growth may have been a cause of US indices levelling off in recent weeks and failing to follow their overseas counterparts higher.
That being said, USD has continued to weaken overnight, enabling other markets to rebound. Gold has rallied back above $1,200 while major paper currencies except for JPY have been rallying. AUD is the top performer overnight on a much stronger than expected Australian jobs report. Other resource currencies like NOK, SEK and NZD are also among the top gainers. CAD is lagging behind its peers as the loonie digests yesterday’s big breakout.
One market that has not been able to capitalize on USD weakness today is crude oil which has dropped back about 1.5%-2.0% in a normal trading correction of yesterday’s 5% gains and breakout over $55.00 for WTI.
Earnings season continues today with a number of US banks reporting.
NetFlix $0.38, $0.77 excluding forex losses vs street adjusted $0.97. sales $1.57B in line
NetFlix subscribers US 2.2 M vs guidance 1.8M, international 2.60M vs guidance 2.25M
NetFlix Q2 guidance $0.26 vs street $0.83
SanDisk $0.62 vs street $0.70
Goldman Sachs $5.94 vs street $4.26, raises dividend by 8.3%
Citigroup $1.51 vs street $1.39
Economic reports released overnight and this morning include:
US jobless claims 294K vs street 280K
US housing starts 926K vs street 1,040K
US building permits 1,039K vs street 1,081K
Australia employment change 37K vs street 15K
Australia full-time 31K vs previous 10K
Australia part-time 6K vs previous 5K
Australia unemployment rate 6.1% vs street 6.3%
NZ Business PMI 54.5 vs previous 55.9
Economic reports due later today include:
10:00 am EDT US Philadelphia Fed street 6.0
10:30 am EDT US natural gas street 53 BCF
FOMC Lockhart, Mester and Fischer speaking
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