USD takes off as stocks retreat into earnings season
Yesterday’s big selloff in North America has continued right through overnight trading in Asia Pacific and European markets and come back around again. US indices have turned sharply lower in the last two hours while USD has rallied.
These latest market moves appear to have been sparked by disappointing earnings from JPMorgan Chase who reported about the same time the action started around 7:00 am ET. The rally by indices toward their all-time highs has built in very high expectations for the current quarter and further disappointments could send more traders looking to take profits and heading for the exits. The positive report from Wells Fargo hasn’t been able to keep the tide from rolling out.
While traders pulling out of stocks in general and high flying technology stocks in particular suggests a more conservative tone, this has been confirmed by the inflows of capital into defensive havens. USD has taken off today as it tries to catch up to the gains made earlier in the week by gold, silver, CHF and JPY. Higher than expected producer prices in the US suggests that inflation pressures may build as the economy improves further supporting the case for continued tapering while weakening the case for extended stimulus.
Higher consumer prices in China, meanwhile, reduce the potential for further stimulus out of the PBOC (who is currently draining away emergency liquidity) and further fiscal stimulus also looks increasingly unlikely in the near term. This has dragged on commodity prices, particularly crude oil and copper. It also has impacted resource currencies with the oil sensitive CAD and NOK falling to the bottom of the league with the China sensitive AUD and NZD falling at a slightly slower pace.
With the weekend approaching it looks like we may see traders continue to reconsider their stances and positions today ahead of the main part of earnings season which runs for the next three weeks.
JPMorgan Chase $1.28 vs street $1.39
Wells Fargo $1.05 vs street $0.97
Economic reports released overnight and this morning include:
The International Energy Agency cut its 2014 demand forecast to 1.3 mmbbls/day from 1.4 mmbbls per day. It also cut its non-OPEC supply forecast to 1.5 mmbbs/day from 1.75 mmbbls/day.
S&P maintained Finland’s AAA credit rating but cut its outlook to negative from stable
US producer prices 1.4% vs street 1.1%
China producer prices (2.3%) vs street (2.2%)
China consumer prices 2.4% as expected vs previous 2.0%
India exports (3.1%) vs previous (3.7%)
India imports (2.1%) vs previous (17.1%)
India industrial production (1.9%) vs street 1.0%
NZ house prices 3.4% vs previous 2.1%
NZ house sales (10.0%) vs previous (7.6%)
Germany consumer prices 1.0% as expected
Spain consumer prices (0.1%) vs street (0.2%)
UK construction output 2.8% vs street 4.4%
Economic reports due later today include:
9:55 am EDT US U of Michigan confidence street 81.0
10:00 am AEST Mon Singapore Q1 GDP street 5.4%