Asian stock market: Asian markets were slightly lower in morning trade following overnight news that U.S. President Donald Trump canceled a scheduled summit with Kim Jong Un. South Korea's Kospi slipped 0.25 percent. S&P/ASX 200 shed 0.1 percent, with the energy subindex's 1.44 percent decline contributing to losses. Greater China markets eased in the morning, with Hong Kong's Hang Seng Index slipping 0.51 percent as energy and tech sector stocks moved lower. On the mainland, the Shanghai composite edged down by 0.23 percent. Japan's Nikkei 225 erased early losses to advance 0.16 percent, bucking the broader decline in the region. Airline stocks were buoyed after the fall in oil prices overnight while the Topix oil and mining sectors slid 1.42 percent and 2.51 percent, respectively.
FX market: USD/JPY's option skew coupled with a bout of risk aversion on Wednesday could mark the tipping point for the next downward lurch for the pair. Demand for out-of-the-money USD call options is peaking around the same area as in January, just before USD/JPY started on a multi-week decline. As Mark Cudmore outlines here, the short-term outlook is dire for global equity markets. That will help keep the yen on a firm footing. Political risks surrounding Italy have knocked down investors who are bullish on the euro. Put options on the shared currency cost more than calls for the first time since November. The change in sentiment has superseded optimism that the European Central Bank may be heading toward the end of its quantitative easing.
Commodities market: Mounting political tensions and wobbly emerging markets should be just the ticket to snap gold out of its doldrums, but strength in the dollar is helping counter demand for the metal as a haven. Spot gold tumbled below $1,300 an ounce last week for the first time this year, and global turmoil so far hasn’t been enough to push it back above that level. The Fed's report yesterday, as well as today's speeches by a number of members of the Monetary Policy Committee, have forced traders to focus on bond purchases, thereby lowering interest rates on two- and ten-year US bonds. Clearly correlated, this strong bullish signal for gold. 10-year bond yields declined to below 3% and 2-year securities registered a significant decline. After the recent downturn, gold may also benefit from a fall in real income, as many investors will most likely not be willing to chase purchases of assets from emerging markets.
European stock market: The relief rally in Italian bonds may not be mirrored in all European stocks, as automakers face the threat of more tariffs from the U.S. German equity futures fall the most among European contracts and Volkswagen, Daimler and BMW may get hit after the White House started aninvestigation into whether car and truck imports threaten national security. Before this development, European exporters already had big event risk hanging over them -- the June 1 deadline for a possible extension in the EU exemption from U.S. metal levies. The move by the U.S. will only add to these jitters, especially for Germany's manufacturing-driven economy.
U.S. stock market: S&P 500 stocks may not have much to show for 2018, sporting a lowly 1.7% year-to-date gain. But 1Q earnings indicate a strong foundation for future growth that goes beyond the benefits of the U.S. tax overhaul. With over 90% of S&P 500 companies reporting, the index is on pace for y/y 1Q EPS growth of 23.5%, well above expectations and the best performance since 4Q10, according to Bloomberg Intelligence equity strategists Gina Martin Adams and Peter Chung. Tech and energy lead, with 91% and 84% of companies surpassing analyst expectations. Seven of 11 sectors have at least 75% of constituents beating bottom-line forecasts, with defensive sectors (telecom, utilities) the notable laggards. It's not just the FAAMG gang (Facebook, Apple, Amazon.com, Microsoft and Alphabet's Google) either; the rest of the S&P 500 is still on pace for a stunning 23.5% EPS gain. Better-than-expected top-line gains were perhaps the best news to come out of 1Q earnings reports. The 6.2% y/y increase in sales is well above the 2011-'17 average of 3.8%. More than 55% of companies have posted better-than-expected revenue, and just 12% missed estimates. Technology is the most prominent outperformer, but industrials, utilities, health care and materials also beat forecasts at least 60% of the time.
Economic calendar for the European and U.S. trading sessions
11:00 Germany - Ifo Business Climate
11:30 UK - Gross Domestic Product
15:30 USA - Durable Goods Orders
16:20 UK - BoE Gov. Carney Speaks
16:20 USA - Fed Chair Powell Speaks
17:00 USA - Michigan Consumer Expectations
18:45 USA - FOMC Member Bostic Speaks
20:00 USA - U.S. Baker Hughes Oil Rig Count
22:30 USA - CFTC Speculative Net Positions
Read more:
25 Canada Square, Level 33, office 50, Canary Wharf London, E14 5LQ +44 20 3608 6256
World Financial Markets - 0700 17 600 Varchev Exchange - 0700 115 44
Varchev Finance Ltd is registered in the FCA (FINANCIAL CONDUCT AUTHORITY) with a passport in the United Kingdom: FCA, United Kingdom - registration number: 494 045, which allows provision of financial services in the United Kingdom.
Varchev Finance Ltd strictly comply with the statutes of the European directive MiFID (Markets in Financial Instruments). targeting increased efficiency, transparency and uniformity of financial instruments.
Varchev Finance Ltd is authorized and regulated by the Financial Supervision Commission - Sofia, Bulgaria: License number RG-03-02-05 / 15.03.2006
The information on this site is not intended for distribution or use by any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.
Disclaimer:
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 63,41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.