News & Analysis
Shares mixed – Dow snaps losing streak – Europe traded in the red; 10-Year yields continue rally; USD hits 4-month highs.
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US markets – had a very mixed session on Wednesday with strong falls seen on the Dow Jones before Boeing reported strong earnings reversing a 200 point drop. Indexes where trading in the red as interest rate fears continued to build. The benchmark 10-year Treasury yield traded at 3.03 percent after breaking above 3 percent for the first time since 2014 on Tuesday. Investors are worried rising borrowing costs may slow the economy and hurt companies’ ability to buy back their own stock. “For 10 years, rates were kept artificially low to encourage risk-taking,” said Jack Ablin, founding partner of Cresset Wealth. “Once we get to more normal levels, that’s going to become a challenge for equities as an asset class.”
Boeing really came to the rescue last night, as it rose 4.2 percent after reporting quarterly results that easily beat analyst expectations. The stock’s rise helped the Dow bounce back from a 201.05-point deficit and snap a five-day losing streak.
The Dow Jones added 59.70 points. The S&P500 gained 4.84 points and the NASDAQ lost 3.62.
European markets – traded lower on Wednesday, earnings and rallying 10-year yield continuing as the key drivers. US markets led sentiment falling as the 10-year yields continued to rally. This pressure didn’t help jittery trade in Europe as sharp falls were seen on the GER30 an hour into morning trade. Novozymes, Valeo, Credit Suisse, Deutsche Boerse, GSK, Statoil, Antofagasta, and Whitbread were some of the businesses to publish earnings reports in yesterday’s session.
The FTSE closed 46.08 points lower. The DAX lost 128.52 points and the CAC finished 30.86 points lower.
Oil – finished higher by 27 cents after trading 65 cents lower during the session. Many analysts say the period of oversupply that started in 2014 has now ended due to supply disruptions and also strong demand.
EIA; Crude inventories rose 2.2 million barrels in the week to April 20, compared with expectations for a decrease of 2 million barrels. Crude stocks at the Cushing, Oklahoma, delivery hub rose 459,000 barrels. Weekly U.S. crude oil production also rose to nearly 10.6 million barrels a day, according to preliminary data. American output has already shot up by more than a quarter since mid-2016, taking it past Saudi Arabia’s output of around 10 million bpd. Only Russia currently produces more, at almost 11 million bpd. These supply figures sent price to session lows.
Supplier cutbacks, steady demand growth, geopolitical tensions and a favourable structure in the futures market have attracted record investment in oil this year. A rise in U.S. government borrowing costs to their highest since 2013 this week has tempered some investor appetite for risk, but analysts said Brent crude futures, the global benchmark, may yet rise toward new 2018 peaks above $75 a barrel.
Forex – the USD hit 4-month highs overnight driven by rallying bond yields. The yield rally has caused U.S.-Japan and U.S.-German yield differentials to widen further in the dollar’s favour, leaving the yen and the euro lower. The AUD and EUR made new weekly lows to the USD overnight. The GBPUSD finished 49 pips lower but failed to break 1.39182. The USDCAD soared to 1.28973 but failed to hold gains. The USDJPY added 62 pips to trade at 2-month high closing at 109.42. The JPY finished mixed to risk, the AUD and GBP making gains and the EUR finishing flat. Gold traded lower to a stronger USD, finishing $6.45 in the red.
The ECB meets this evening, rates are expected to remain on hold at 0.00%. Traders will be looking to the statement for clues on future sentiment. Analysts say the market needs clarity about the European Central Bank’s pace of planned rate hikes before the euro can break higher. “It’s hard to envision (the ECB) will want to communicate a stronger conviction about normalization… in the context of weaker European data and a Bank of England that seems to have already signalled, through Carney’s comments, that it will not raise in May,” said Wizman.
Gold – could be starting to find support from 1320.50, we can see two support areas on the daily chart. A fail at the current area could see sellers test down to the second level. To show buyers are gaining an imbalance we would like to see 1320.50 continue to hold in the short term.
Good trading from Eightcap.
Sources; CNBC. All times are AEST
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