US Stocks Fall on Poor Data – Dow off 1 %.
US stock markets took a hit yesterday to end a 3-day winning streak as GDP data out of the states came in well below expectations. However, it is not all doom and gloom for Asian markets on the open today as tech heavyweights Alphabet and Microsoft have reported stellar earnings numbers after the bell in New York. The Dow lost 0.98% on the day followed by the Nasdaq and S&P which dropped 0.64% and 0.46% respectively. US treasury yields pushed higher to levels not seen for 5-months with the 2-year gaining 6.3 basis points to 4.999% and the 10-year up 5 basis points to 4.704%. Oil gained good ground, Brent rising 1.1% to $89.01 per barrel and WTI pushing up 0.9% to $83.57 per barrel and Gold rose 0.7% to trade around $2,331 on the New York close.
Fed Rate Chances Pushed out Ahead of Key Data
The market is now pricing in the first Fed rate cut in December this year after another indication in data last night that inflation is remaining very sticky in the US. Despite a much lower print for the headline GDP number yesterday, which came in with a 1.6% annualized figure against the expected 2.4%, the market is still looking for a much more hawkish Fed after the same report indicated continued high inflation. The data showed that the PCE component rose 3.7% against an expected 3.4% which now puts even greater focus on today’s March PCE Price Index which is the Fed’s favoured inflation indicator. The FX market focused on the headline number and the dollar dropped on the day, apart from against the yen, where it continued to climb, but if tonight’s data eclipses expectations and beats the anticipated 0.03% m/m rise, then expect the dollar to follow US yields and drive higher.
Markets Poised for a Lively End to the Trading Week
Traders are preparing for a lively finish to the week today with two key risk events bookending the day, with both having the potential to send volatility through the roof. First up in the Asian session is the latest rate call from the Bank of Japan. The market is expecting rates to remain on hold, however given the well-publicised demise of the Yen in recent weeks, some traders feel we will have a more hawkish tone to the meeting, if this is the case and it’s teemed up with intervention in the currency at some point in the day, then it could be an extremely busy day ahead. The London session is set to be quieter although Swiss traders will be paying close attention to comments from the SNB’s Thomas Jordan early in the piece. The week’s major data release is scheduled for the final session of the day with the Core PCE Price Index update due out early in the US session, there is now even more of a focus on this release after last night’s data and if there is a significant miss from the expected 0.3% month-on-month rise then expect sharp and fast moves into the weekend.
