News & Analysis

Earnings drive US and European stocks higher – Facebook surges 9.1%; ECB holds rates; USD makes late comeback; Bank of Japan Friday

Apr 27, 2018 | Market Updates

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BOJ Tentative during Asian Session
Ôû© JPY Monetary Policy Statement
Ôû© JPY BOJ Outlook Report
Ôû© JPY BOJ Press Conference

Ôû© 18:00 CHF SNB Chairman Jordan Speaks
Ôû© 18:30 GBP Prelim GDP
Ôû© 22:30 USD Advance GDP
Ôû© 00:00 GBP BOE Gov Carney Speaks

US markets – rallied on Thursday driven higher by bumper earnings, Facebook surged 9.1% after the company posted better than expected earnings and revenue for the first quarter The Company’s number of daily active users pointed to steady engagement in the platform despite backlash from the Cambridge Analytica debacle. Advanced Micro Devices also posted earnings that topped expectations, sending its stock up about 14 percent! Chipotle jumped by 24.4% after reporting a stronger-than-expected profit, boosted same-store sales that easily topped expectations.

“There are two things driving the market: Earnings and the news flow out of Washington,” said Randy Frederick, vice president of trading and derivatives at the Schwab Center for Financial Research. He noted that earnings may be currently overshadowing the news out of DC. “The earnings reports have been good thus far,” Frederick said. “I see no reason why that wouldn’t continue.”

The Dow Jones added 238.51 points. The S&P500 gained 27.54 points and the NASDAQ closed 114.94 points higher.

European markets – rallied on the back of corporate earnings, a stable ECB and a positive US lead. The GER30 fell on the open trading deep into the red. Markets recovered mid-London session. Auto stocks were among the top performers, up more than 0.7 percent amid earnings news. Germany’s Volkswagen reported weaker-than-anticipated profits in the first three months of 2018. However, an impressive rise in vehicle sales over the same period pushed shares more than 2.6 percent higher. Neste surged to the top of the European benchmark after it reported upbeat first-quarter figures finishing 17 percent. Philips Lighting slumped towards the bottom of the index after it reported a big first-quarter earnings miss, trading over 13% lower.

The European Central Bank left interest rates unchanged at 0.00%, amid signs of an apparent softening in the euro zone’s growth outlook. Central Bank President Draghi: ÔÇ£We continue to expect interest rates to remain at their present levels for an extended period of time, and well past the horizon of our net asset purchases.ÔÇØ ECB President Mario Draghi said “underlying strength” in the euro zone’s economy continued to underpin the bank’s confidence despite signs of “moderation” in recent weeks. He added an “ample degree of monetary stimulus” remained necessary over the coming months.

The FTSE closed 42.11 points higher. The DAX recovered 78.17 points and the CAC finished 40.28 points higher.

Oil – traded on a choppy session failing to hold its rally to 68.71. Sellers emerged trimming 60 cents, price closing at $68.08. Traders uncertain as French President Emmanuel Macron said he expects U.S. President Donald Trump to restore sanctions on Iran. Trump will decide by May 12 whether to restore U.S. sanctions on Tehran, which would likely result in a reduction of its oil exports. Falling oil output in Venezuela is further reducing supply at a time of high demand. Soaring U.S. oil production and exports are holding back further price gains.

Forex – the ECB failed to get the EUR moving as rates were held at 0.00%. The action got going later in the NY session as a choppy USD found some buyer interest and came back to the black knocking risk lower after two failed attempts. With no real solid foundation, the EURUSD fell hard losing 56 pips after making a 51 pip rally. The GBPUSD lost 9.5 pips after giving up a 75 pips advance. The AUDUSD finished 10 pips lower. The Japanese Yen made a late surge hitting the EUR hardest, the EURJPY finished 74 pips lower. The USDJPY snapped a 6-day winning streak closing 12 pips lower. Gold spent much of the night fighting to hold positive territory, price spending hours between 1325.40 and 1322.20. Numbers moved to the seller camp after the USD found direction Gold finished $6.12 lower breaking its first support zone. We see 1310.50 as the next support area below.

BOJ – today could be a big day on the JPY side with key news coming out throughout the day from the Bank of Japan. The market is looking for the Bank of Japan to keep monetary policy steady and project inflation to hit its target next fiscal year, signalling that its next move could be to dial back its huge stimulus albeit at a much slower pace than its global peers. Markets are on the look-out for what Kuroda says on the effect rising U.S. Treasury yields could have on the Bank of Japan’s policy capping Japanese long-term rates around zero percent.

ÔÇ£The BOJ is controlling Japanese yields well and I don’t think that would change as a result of U.S. yield gains,ÔÇØ said Mari Iwashita, chief market economist at Daiwa Securities. ÔÇ£If U.S. rates continue to rise, that might put upward pressure on Japanese yields. But for the BOJ, that’s far less trouble than a yen spike that puts it under pressure to ease further,ÔÇØ she said. The BOJ is widely expected to maintain a pledge to guide short-term interest rates at minus 0.1 percent and the 10-year bond yield around zero percent. In a quarterly review of its projections, the BOJ is likely to keep unchanged the timeframe for hitting its price goal, now set at fiscal 2019

Chipotle blows up after smashing earrings, its stock price surged just over 24%

Good trading from Eightcap.

Sources; CNBC – Reuters – All times are AEST

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