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US stocks weaker – Europe flat; Oil rebounds – Gold hits new weekly low; USD continues to push.

May 1, 2018 | Daily Market Outlook

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US markets – traded lower on Monday, telecommunications stocks suffer a 2.7 percent pullback. The decline in telecom follows news that T-Mobile agreed to buy Sprint for $26.5 billion. Some analysts are sceptical the deal will get federal approval. The major stock indexes, however, posted their first positive month out of the last three. “People became a little too complacent last week,” said Ilya Feygin, managing director and senior strategist at WallachBeth Capital. “The global economy has downshifted in the last few months and it’s disappointed high expectations.” McDonald’s earnings also beat the Street, sending the Dow component 5.8 percent higher.

“I’m encouraged by the reaction to McDonald’s earnings,” said Lindsey Bell, investment strategist at CFRA. She also said that several companies have seen their stocks initially rise and then fall after reporting better-than-expected earnings. “For the most part, it seems like investors are taking advantage of any pop in stocks to take profits,” she said. The U.S. 10-year Treasury yield briefly fell to its lowest since April 20, while the 2-year yield traded near 2.5 percent. The U.S. dollar index rose slightly.

The Dow Jones lost 148.04 points. The S&P500 fell by 21.86 points and the NASDAQ closed 53.53 points lower.

European markets – closed higher on Monday, the last trading day of the month, as investors digested merger news and focused on earnings. Asda and Sainsbury’s will merge in a roughly £15 billion ($20.67 billion) deal. Seb, WPP and Old Mutual released fresh earnings. Germany, France and the U.K. have urged the U.S. to not apply metal tariffs to Europe. In March, President Donald Trump imposed a 25 percent duty on steel imports and a 10 percent duty on aluminium but Europe got a temporary exemption from the tariffs. Such an exemption is set to end today.

The FTSE closed 7.09 points higher. The DAX added 31.24 points and the CAC finished 37.31 points higher.

Oil – Oil reversed early losses after Israeli Prime Minister Benjamin Netanyahu said he would make an announcement about the nuclear deal with Iran. This was after oil fell earlier in the day after a weekly report showed U.S. drillers added five oil rigs in the week to April 27. “Until May 12, you’re not going to see any significant downward correction,” PVM Oil Associates strategist Tamas Varga said. “Reimposing U.S. sanctions is not a foregone conclusion just yet.” Price finished the session 59 cents higher at $68.48.

Forex – weaker than expected German data hurt the euro against the U.S. dollar, German monthly retail sales unexpectedly dropped in March, dampening cheer around a consumer-led upswing in Europe’s biggest economy. The dollar last week enjoyed its biggest weekly gain in more than two months. U.S. data on Monday showed that consumer prices accelerated in the year to March, with a measure of underlying inflation surging to near the Federal Reserve’s 2 percent target as last year’s weak readings dropped out of the calculation. The EURUSD fell by 45 pips hitting 1.2077. The GBPUSD made new lows but steadied closing slightly lower. The AUDUSD was the other big loser dropping below .7550. The Yen was mixed to the majors. The USDJPY closed higher, while risk finishing mixed. The AUDJPY lost 30 pips.

Gold closed just over $7 lower, sellers tested 1310 at one stage in the session. That point was the next main daily chart low. Price recovered by $5 after hitting that point. Traders could be watching this test for a new test or buyer confirmation of a new low being put in.

Good trading from Eightcap.

Sources; CNBC  All times are AEST

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