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US stocks end lower – 10 Year note Yield breaks 2.9% – Europe mixed; Oil fails to hold new highs; GBP slammed for a second day; 1354 continues to stop Gold bulls

Apr 20, 2018 | Daily Market Outlook

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US markets – ended lower on Thursday, price-driven lower by worse than expected earnings and new yield worries. Taiwan Semiconductor Manufacturing (TMSC) said Thursday it expects second-quarter revenue to range between $7.8 billion and $7.9 billion, well below a Wall Street consensus estimate of $8.8 billion. Shares of Apple fell 2.8 percent, while Nvidia, Micron and Advanced Micro Devices all declined at least 2.4 percent. The VanEck Vectors Semiconductor ETF (SMH) dropped 4.5 percent in its worst day since Dec. 1, 2016.

Interest rates back on the agenda as the 10-year Treasury note yield broke above 2.9 percent. The 10-year traded around these levels earlier this year, sparking a correction in the U.S. stock market as investors feared the inflation was rising faster than expected. The move higher on the benchmark U.S. yield came as the two-year yield traded near highest levels in nearly a decade. “The market is looking tired as yields may soon be a constraining factor that could overshadow good earnings,” said Peter Cardillo, chief market economist at Spartan Capital Securities.

Data, weekly jobless claims totalled 232,000, beating expectations. The Philadelphia Fed index hit 23.2 for April, better than the Reuters estimate of 20.

The Dow Jones lost 83.18, the S&P500 closed 15.51 lower and the NASDAQ closed 57.18 points lower.

European markets – closed mixed on Thursday, household goods led the losses closing 1.9 percent lower. Unilever was among the sector’s worst performers after the Anglo-Dutch consumer goods company reported sales figures that were in line with expectations. Media stocks rallied during the day’s trade, closing 1.7 percent higher. Weir Group was the third best performing stock, with its shares closing 6.2 percent higher. The firm announced it would try to purchase U.S.-based ESCO Corp for an equity value of over $1 billion.

The Governor of the Bank of England has said that an interest rate rise is “likely” this year, but any increases will be gradual. Mark Carney said major decisions had to be taken on Brexit, including on the detail of the implementation period and the shape of a final deal.

The FTSE closed 11.58 higher, the DAX dropped 23.41 points and the CAC closed 11.47 pts higher.

Oil – had a mixed session last night, buyers took charge late in the European too early in the NY session hitting new highs for the year, reaching $68.49. Seller interest picked up at this point and sellers trimmed gains. Price didn’t fight back and closed 61 cents lower at $68.09. Saudi Arabia has commented they want an oil price of $80-$100 per barrel. It’s no secret that Saudi’s require Oil to be trading above a certain point to make it not only profitable but supportive of their economic policies. Currently, price is close but not at that level. You would expect they will continue to try and work the market higher. U.S. commercial crude stocks are declining towards their 5-year average.

Forex – another yo-yo session with the USD falling away in the European session to regain interest into the NY session. The AUD, EUR and GBP where all tracking higher before the NY session. The AUDUSD moved back above .7800. The EURUSD also tested it’s range high. Once the tide turned it turned quickly. The AUDUSD gave up a 34 pip rally to finish 54 pips lower. The EURUSD continues to trade in its wedge pattern. The GBP was the bigger story last night as mixed messages came out of the BOE regarding rates. On one hand, rates were noted to increase. One hike possibly coming this year. Carney also noted; Brexit uncertainty could also delay rate rises. The GBP didn’t care for this type of talk cashing to new weekly lows to the JPY and USD. The Cable has had a real reverse in fortunes losing 255 pips in three sessions after making new 2018 highs on Tuesday!

The Japanese Yen closed higher to risk currencies, but the USD added 14 pips to it. The USDCAD followed up Wednesday’s rally with further 47 pip rally last night. Gold looked quite bullish as it hit 1354.73 testing range highs. Sellers took over once USD fought back, price closing back in the range $3.40 lower. Gold continues to be held in a wedge pattern.

GBPUSD – change in fortunes from new yearly highs to weekly lows in three sessions.

Good trading from Eightcap.

Sources; CNBC – BBC. All times are AEST

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