Key Events This Week: Apple Share Prices To Catch Up With Rest Of Big Tech?

With the US earnings season underway amid a relative calm in US Treasury markets, benchmark US stock indexes such as the Dow, S&P 500, and the Nasdaq 100 look set to post new record highs this week, even though the futures contracts are dipping slightly at the time of writing.

As for the currency markets, amid a softening US dollar, it remains to be seen whether the likes of the euro and the Canadian dollar can take advantage of the potential catalysts in the coming days:

Monday, April 19

  • Canada unveils federal budget

Tuesday, April 20

  • Johnson & Johnson earnings (before US markets open)
  • Netflix earnings (after US markets close)
  • Apple unveils new products

Wednesday, April 21

  • Bank of Canada rate decision
  • Canada CPI (inflation)

Thursday, April 22

  • ECB rate decision
  • ECB consumer confidence
  • Intel earnings
  • American Airlines earnings

Friday, April 23

  • Eurozone, UK, US Markit manufacturing PMI
  • US new home sales

Watch Apple’s share price

At its event labelled “Spring Loaded”, the iPhone maker is expected to announce new products, including a line of new iPad Pros. The iPad contributed over 8% to Apple’s total annual revenue in three out of the past four years. Still, last year’s figures were the highest for iPad sales since 2014, as consumers flocked to the tablet as work and schooling commitments became home bound amid the lockdowns worldwide.

It remains to be seen whether the confirmed features of this new iPad Pro would also excite market participants, considering that Apple’s share prices have failed to match its January record high. The stock is still some 6.3% lower since recording its highest ever closing price on January 26th.

During the same period (since 26 January):

  • Facebook has surged 8.56% to post a new record high on April 7
  • Alphabet shares have climbed almost 20% to hit a new record high on April 16
  • The Nasdaq 100 has climbed 4.09% to post a new record high on April 16

“Perhaps the iPad Pro could stir up enough enthusiasm this week for Apple’s stock to allow it to catch up with other tech stocks.”

CAD to still outperform G10 peers?

The Canadian dollar is the second best-performing G10 currency against the US dollar so far this year, and has also strengthened against all G10 currencies except for the Norwegian Krone. However, the CAD has fallen against most of its G10 peers on a month-to-date basis.

Still, Canadian dollar bulls can take heart from the fact that USDCAD’s 50-day simple moving average has resisted any major upward move for this currency pair to keep its downward trend intact.

“From a fundamental perspective, the Canadian dollar’s strength has been fuelled by the robust recovery in Canada’s economy.”

Today, Prime Minister Justin Trudeau is set to release the government’s first budget in two years. This increased spending of tens of billions could help recover the last 296,000 of the 3 million jobs it lost to the pandemic.

With the economy apparently on firmer footing, the Bank of Canada could announce the paring back of its bond purchases this week, and may even comment about a potential rate hike sooner than 2023.

“Should that happen, that could drive Canada’s government bond yields even higher, which may then serve as a tailwind for the CAD.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

US, China Show How It’s Done

China posted its highest-ever recorded GDP growth of 18.3% in the first quarter, despite coming in slightly below the market-expected 18.5% print. The broad-based recovery also extended into industrial production, which climbed 14.1% year-on-year last month, while the March retail sales exceeded market forecasts by expanding 34.2% compared to the same month in 2020. Although the year-on-year comparisons are heavily skewed, considering that China was in a lockdown this time last year, it still shows the economy taking meaningful strides into the post-pandemic era.

“China’s stellar economic prints, coupled with Thursday’s better-than-expected data out of the US, shows the global economic recovery is indeed gathering momentum, and such prospects appear to justify the bullish prospects for risk assets moving forward.”

US stocks set to carve fresh peaks in coming week

Global investors will also be eyeing the preliminary US consumer sentiment readings for April due later today. Markets expect consumer sentiment to be at its highest since February 2020, before the Covid-19 pandemic forced lockdowns Stateside. The US consumer sentiment data would also be read amid hopes of a broad-based recovery which have been further fueled by yesterday’s economic data releases, featuring the lowest weekly jobless claims since March 2020 and the highest month-month gain for industrial production since July.

US benchmark stock indices posted new record highs on Thursday as markets cheered signs that the US economy is well and truly getting back on its feet since the pandemic. Although US equity futures now point to a breather when markets open Friday, one would be justified in thinking that new record highs remain in the offing.

“Still, what’s crucial for investor sentiment is that this economic recovery doesn’t show signs of letting up. The global vaccination drive along with the supportive monetary and fiscal measures in major economies all form key components for the risk-on outlook.”

Gold eases as the buck comes up for air

The dollar index (DXY) is attempting to post its first daily advance for the week, though is unlikely to be able to prevent two consecutive weekly declines for the first time since February. The greenback’s support has been eroded with 10-year Treasury yields moving below the psychologically-important 1.60% mark, which in turn allowed spot gold to break above its 50-day simple moving average (SMA) for the first time since early February.

This technical event may offer bullion bulls a whiff of optimism that could spur prices on higher, taking advantage of the fact that real yields lurched deeper into negative territory yesterday. It’s still early days before one can decisively call for a bullion recovery, although to be fair, spot prices have been posting higher highs since March.

“A decisive breach of its 100-day simple moving average which currently resides the psychologically-important $1800 may just do the trick as a clarion call for gold bulls to rush back in.”

Oil benchmarks take heart from economic recovery

Oil prices are set for their biggest weekly advance in six, taking advantage of the moderating dollar seen so far this month. From a technical perspective, the 50-day moving average for the active Brent futures contract has proven itself as a reliable support level in recent weeks, guiding the global benchmark higher.

While the hopeful data out of the US and China this week should support the case for further gains in oil prices, global demand has to show itself robust enough to absorb the incoming OPEC+ supplies starting next month. Otherwise, any major slippage in reining in Covid-19’s spread could then undermine oil’s recent gains.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Wobbly Wednesday? US Earnings Preview

The US government has ordered a pause to administering Johnson & Johnson’s Covid-19 vaccine. On a separate note, the US inflation figures came in higher than expected.

Still, the S&P 500 climbed 0.33% while the Nasdaq 100 advanced by 1.2%, with both indices boosted by the likes of Tesla, Nvidia, and Apple. The Dow Jones index however ended the latest cash session lower by 0.2%, which means we’ll have to wait a bit more before we can witness 34,000 Dow.

US equity futures are holding relatively steady as the next earnings season kicks off today.

The Wall Street 30 minis are trying to ease away from overbought territory, ready to relaunch higher when the next opportunity arises.

Banks first on the roll call

Financial heavyweights are first out of the earnings gates today:

  • JPMorgan
  • Goldman Sachs
  • Wells Fargo

Note that financial stocks have been the second-best performing sector on the S&P 500 so far this year, having climbed by 18.5% year-to-date as markets pin their hopes on the US economic recovery. However, according to FactSet, less than 50% of analysts have a Buy rating on financial stocks heading into the second quarter. Perhaps some of that pessimism stems from the looming tax hikes and tougher regulations under the current US administration.

Still, for the S&P 500 as a whole, this is set to be a bumper earnings season.

Markets would want to see whether some of these estimates, as gathered by FactSet, actually prove true:

  • Record high increase in EPS (earnings per share) estimates of 6%
  • Highest earnings growth in over 10 years of at least 28%

Already, about 60 S&P 500 companies have issued positive guidance for EPS and sales, with that 60 tally already being a record high. Such has been the optimism leading up to the earnings announcements.

“Ultimately, market participants will remain primed to the earnings outlook for the rest of the year, amid the expected economic recovery. Such corporate commentary could determine whether the S&P 500 should soar higher from current levels, even though a pullback from overbought levels appear warranted in the near future.”

Vaccine woes unlikely to dampen risk appetite … for now

Markets have been willing to ignore Johnson & Johnson’s vaccine pause for the time being, nothing the shots by J&J represent only 3.6% of the near-190 million shots delivered in the US so far. Also, the pause may be lifted in a matter of days.

“However, if such concerns escalate and become material enough to derail the economic recovery, that may trigger a pullback in risk assets.”

For Johnson & Johnson’s stock itself, should the 100-day simple moving average (SMA) hold steady as a support level, as it did back in early March, that could help its share price bounce back when its single-shot vaccines can be administered once more. The longer the wait, perhaps the stronger the weakening bias for the stock in the interim as shareholders patience wears thin.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Euro’s Fortunes Set To Reverse?

Such a performance is reflected in the EUR index climbing by more than one percent on a month-to-date basis. This is an equally-weighted index, comprising the following currency pairs:

  • EURUSD
  • EURCHF
  • EURGBP
  • EURNZD
  • EURCAD
  • EURAUD

“A couple of key technical events have transpired of late that should form a more solid base for this index to climb higher.”

Firstly, prices have formed a higher high and have breached its 50-day simple moving average (SMA). Meanwhile, its MACD has recently moved above the base line of 0.

A sustained break above the 1.3210 line, which was the resistance level form early March and also the support level for some early February price action, could ultimately lead the EUR index to the 1.3277 mark. Otherwise, a break back below its 50-SMA could open a path back towards the 1.3100 mark.

Euro’s fate depends on key data

The euro has been able to hold on to recent gains, following its better-than-expected February retail sales data that was announced yesterday. It rose by 3% compared to January, beating estimates of 1.7%. The year-on-year figure shrank by 2.9%, which is still better than the 5.3% decline that markets had expected. Both the month-on-month and year-on-year prints also fared better than January’s figures.

Investors will have to several key events to monitor over the coming days that could determine the shared currency’s performance over the course of the week:

Tuesday, April 13

  • ZEW survey expectations

Wednesday, April 14

  • EU industrial production
  • ECB President Christine Lagarde speech

Friday, April 16

  • March inflation (final print)

Euro’s outlook mixed

Intriguingly, the 25 delta risk reversals show that markets are bullish on the euro’s performance against all other G10 currencies, except against the Japanese Yen, for the next 2-month period.

Meanwhile, the latest data from the CFTC (Commodity Futures Trading Commission) for the week of April 6 shows a mixed outlook for the euro. Leveraged funds have raised their net-short positions on the euro to the highest since July. On the other hand, asset managers have increased their net euro longs to reverse two consecutive weeks of paring back such positions.

Note that the EU recovery fund that’s worth 750 billion euros is due to course its way through the bloc in the middle of this year, once it is ratified by member countries. Such financial aid is set to offer more help to the continent’s recovery into the post-pandemic era.

“Until then, it is imperative that the continent has a firm grip on the pandemic and gets its vaccination drive back on track to catch up with the inoculation rates seen in the UK and the US. That could form the basis for its economic recovery which could then translate into a sustained rebound for the euro.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Can US Stocks Climb Higher?

From a technical perspective, such dips are only natural as these assets pull away form overbought territory, as adjudged by their respective 14-day relative strength indexes.

Last week was also the calmest week for the US stock market so far in 2021, with this past Friday’s trading volume at its lowest since Christmas eve, according to Bloomberg data. Wall Street’s fabled fear gauge, the VIX index, fell to its lowest since February 2020, before the pandemic forced lockdowns across the developed world.

Perhaps the most pressing questions now: how long will this tranquility last, and can these benchmark US indices post fresh record peaks?

Much could depend on the key data and events this week:

Tuesday, April 13:

  • US consumer price index

Wednesday, April 14:

  • Fed Beige Book
  • Fed chair Jerome Powell speech
  • US earnings season kicks off

Thursday, April 15:

  • US retail sales and industrial production

Friday, April 16:

  • US consumer sentiment

Inflation Expectations Still A Primary Driver Of Market Sentiment

The outlook for US inflation still remains a hot topic for debate.

On one hand, markets expect prices to rise, fueled by the trillions that have been pumped into the economy by the US government and the Federal Reserve. On the other hand, Fed officials have often reiterated their expectations that any burst of inflation is likely to fade away. They have also sought to repeatedly assure the markets that policymakers have the tools to rein in inflationary pressures if they start to do damage to the economic recovery.

With all that in mind, Tuesday’s release of the US March consumer price index is set to be used as the next marker in ascertaining whether markets’ expectations for an inflation overshoot are warranted. Economists expect the month-on-month print to come in at 0.5%, 10 basis points compared to February’s reading. The year-on-year headline CPI is expected to come in at 2.5%, although investors will be cognizant of the low base effect from March 2020.

“All that said, a higher-than-expected inflation reading could prompt more selling of US Treasuries, pushing yields higher while triggering volatility in equities. Overvalued tech names stand to lose out in such a scenario, potentially eroding the Nasdaq 100’s month-to-date gains of 5.76%.”

Of course, investors will be parsing through all of the key events listed above, and assessing how each of them (Fed Beige Book, Powell’s speech, retail sales, industrial production, consumer sentiment) could fit into the broader narrative surrounding US inflation and the Fed’s policy response.

“If markets get the impression that the Fed has got it wrong, and may have to ease up on their asset purchases and raise US interest rates sooner than expected, that could send a jolt across multiple asset classes and dampen the tech stocks party once more.”

Earnings Season To Encourage Risk-On Mood?

Still, investor sentiment could be buffered by what’s expected to be the highest earnings growth for S&P 500 companies in a decade!

Earnings season kicks off on Wednesday, with financial heavyweights such as JPMorgan, Goldman Sachs, and Wells Fargo reporting their respective quarterly financial results.

According to FactSet, it’s estimated that earnings could grow by 23.8% year-on-year, although the actual figure might be at least 28%. More surprises to the upside could spell further gains for the S&P 500.

The main story around the US stock market remains the US economic recovery. Fed Chair Jerome Powell, in a TV interview that was aired over the weekend, said that the US economy is at an “inflection point” and that “the outlook has brightened substantially”. He also warned of that a resurgence of Covid-19 in the States is a major risk to the economic recovery.

Unless such a negative risk materializes, markets think that the recovery that runs too far too fast could influence the Fed policy outlook, although such a narrative is still subject for interpretation. A massive shift in expectations surrounding the Fed’s policy trajectory, which causes an unruly surge in Treasury yields, could upend the risk-on party. Also, if the inoculation efforts are derailed which dashes the optimism surrounding the US economic recovery, that could warrant a pullback in stocks as well.

“Until such things happen, I do expect stocks to continue claiming higher ground over the near-term.”

Open your FXTM account today

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

 

Stocks Post Record Highs Galore

The MSCI ACWI index, which measures stock markets in both the emerging and developed world, also posted a new record high on Thursday, having climbed 7.16% already so far this year.

However, Asian stocks have been diverging from their global peers of late.

“The Dow Jones index kicked off the trading week with a new record high, and could set another one before the weekend. Meanwhile, the S&P 500 has been met with little resistance so far in creating a larger gap above the psychologically-important 4,000 mark.”

“Markets Extra” Podcast: What is an index and why it matters? A chat with Nasdaq

With 10-year Treasury yields having fallen by some 15 basis points from its March 30th high, that has made for a conducive environment for stock market gains. The VIX index has reached its lowest point since February 2020, before the Covid-19 pandemic rocked global financial markets.

Fed flute plays a calming tune

The dovish Fed speak this week has played its role in soothing markets, as policymakers reiterate that they’re in no hurry to adjust their accommodative stance. Fed Chair Jerome Powell once again sought to assure market participants that the central bank has enough tools at its disposal to contain inflationary pressures, should they get out of hand. Amid green shoots of the US economic recovery, Fed officials have repeatedly said that any inflation overshoot is expected to be transitory.

Yesterday’s higher-than-expected US initial jobless claims is another reminder that the US economy will need “some time” to make its full recovery. The pace of declines in the weekly continuing claims is also slowing down, and at 3.7 million, is still double compared to pre-pandemic levels.

“As long as investors believe they can rely on the Fed’s conveyed intentions surrounding their policy outlook, that should roll out a longer runway for risk asset gains. As we know, markets don’t like surprises.”

Hence it is on the Fed to ensure that it can properly telegraph any policy adjustments, including the eventual tapering of its asset purchases, or risk roiling markets once more.

Earnings up ahead

Volatility could pick up next week when another US earnings season kicks off.

Markets are expecting another strong quarterly showing from Wall Street, as the US economic recovery feeds into corporate America’s top and bottom lines, which should translate into more gains for equities.

However, that isn’t to say that it’s all smooth sailing from here on out. Amid such hyped-up expectations, any major negative surprises or disappointing earnings guidance could see investors’ shoulders slump once more. The persistent hold of Covid-19 on major economies, along with uneven vaccination rates, could curtail the pace at which the world economy can return to pre-pandemic levels. Another unexpected surge in Treasury yields could also shatter the market calm at present, as the Fed’s policy outlook remains open for interpretation.

While stock market gains may seem there for the taking over the near term, investors must remain vigilant over the potential risks ahead.

open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

US Stocks Take Delight In Dovish Fed

Fed Governor Lael Brainard used a TV interview appearance to remind markets that US economy still has over 9 million fewer jobs compared to pre-pandemic levels. Dallas Fed President Robert Kaplan and Chicago Fed President Charles Evans also appear to have downplayed inflation even if it were to reach 2.5% or higher, as long as it’s transitory and the overshoot eventually fades.

“Until the hard data shows that the US economy is truly running hot and beyond the Fed’s tolerance, the US central bank appears poised to leave its policy support settings untouched in the interim.”

The Fed has been buying $120 billion in bonds per month while keeping the benchmark interest rates near zero.

New record highs likely in store

US equity futures are pushing higher at the time of writing, after the S&P 500 posted its highest ever closing price on Wednesday. However, this blue-chip index has been flirting with overbought levels, judging by its 14-day relative strength index, and has been testing the upper range of its trading bands. A breach of these key technical levels may signal that the index is ripe for a slight pullback.

The communication services sector was the best performer on the S&P 500 mid-week, led by tech heavyweights such as Twitter, Facebook, and Alphabet. These 3 stocks, along with Snap, are the evenly-weighted constituents of the FXTM Social Media index, which also registered a new record high on Wednesday. Such a feat was enabled by the new record highs that Facebook and Alphabet posted yesterday, aided further by Snap Inc’s 15% surge so far in April.

Since bouncing off its 50-day simple moving average, the FXTM social media index has advanced by more than 8% so far in April. For comparison, such gains far surpass the month-to-date climbs in other US benchmark indices:

  • Dow Jones: 1.41%
  • S&P 500: 2.69%
  • Nasdaq 100: 4.01%

The cool off in US Treasury yields has also contributed to this supportive environment for US stocks to realize more of their upside. 10-year yields have dropped by as much as 12 basis points this month, while stock market volatility, as measured by the VIX index, has moderated below its long-term average of 20.

What to look out for on Thursday?

Fed Chair Jerome Powell is set to speak as part of a panel at the IMF and World Bank spring meetings. Also on the Fed speak radar later today are St. Louis Fed President James Bullard and Minneapolis Fed President Neel Kashkari.

“While today’s serving of Fed speak is likely to continue in that dovish vein, investors must remain vigilant for any fresh clues about policymakers’ biases in their eventual response to a full US economic recovery.”

And when that day comes and the Fed has to eventually pull back its policy support, there could be an almighty reaction across global financial markets, especially if the Fed does a poor job conveying its intentions. But until then, and as long as the Fed leaves its policy settings untouched, that should spell more upside for US stock markets.

open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Can Carnival’s Share Price Cruise To A New 2021 High?

The cruise operator’s financial results for the three months ending 28 February are set to bear the deep scars inflicted by the global pandemic. Yet investors have been willing to pay scant attention to such backward-looking figures. Instead, they have been looking forward to the day when Carnival’s cruise ships will set sail once more, filled with holiday goers who are eager (and also hopefully vaccinated) for a break from the lockdowns around the world.

Such hopes have catapulted the stock higher by almost 260% since 2 April 2020!

Carnival’s stock price still a long way from pre-pandemic levels

Following an 85% plunge between 17 January until 2 April last year, Carnival’s stock ended up sinking below the $8.00 mark to hit its lowest levels since 1993. Despite the stunning recovery in the 12 months since, the stock currently remains about 45% lower from its pre-pandemic high, when it breached the $50 mark in January 2020.

From a technical perspective, Carnival’s stock recently enjoyed support at its 50-day simple moving average. And with its MACD momentum poised to break above its signal line, coupled with the fact that its 14-day relative strength index has yet to reach technically overbought levels, the stock appears on the cusp of exploring more of its upside.

“Although there is still a notable distance between its current share price from pre-pandemic levels, such a gap also signals the potential upside for Carnival’s stock, as its business eventually is restored.”

How might Carnival’s share price perform today?

Market participants are poised to react to any commentary or details today about when more of Carnival’s cruises can resume. Any developments related to advanced bookings and pricing could reveal a lot about the pent-up demand for the company’s products and offerings.

“Markets are pricing in a 5.56% move, either upwards or downwards, when Carnival releases its fiscal Q1 earnings. Note that this stock is now 4% away from this year’s highest closing price, set on 15 March.”

Carnival’s share prices registered gains after 4 out of the past 5 quarterly earnings announcements. Despite some negative surprises in the hard numbers, clearly many investors and traders had little qualms getting on board with this stock, pushing it higher by 32% already so far this year.

Still, going into the earnings announcement, at least 5% of Carnival’s shares are being shorted.

What are the market expectations for Carnival’s fiscal Q1 earnings?

Wall Street predicts that Carnival’s latest quarterly revenue would come in at $66.9 million, and an adjusted loss per share of $1.68 for the period.

For Carnival’s bottom line, Wall Street is forecasting a net loss of $1.74 billion in this latest financial quarter, which would mark a fifth consecutive fiscal quarter of net losses for the cruise operator. No surprise also that its top line has been wiped out by Covid-19, dwindling to a mere pittance versus the average $5.1 billion in quarterly revenue it used to rake in since December 2018 until the pandemic struck.

It is also estimated that Carnival had to burn through $600 million per month between December 2020 and February 2021 in trying to keep its business afloat. Carnival’s decision to get rid of 19 ships off its books did help pad up its cash buffers, adding to the billions raised via sales of bonds and common shares.

Is the tide turning?

However, Carnival’s fortunes are set to reverse course in the coming months.

  • Mid-summer 2021: The Centers for Disease Control and Prevention said yesterday that US cruises may recommence in a few months, as Carnival threatened to relocate its ships away from US ports.
  • May 2021: Carnival’s Italian outfit, Costa Cruises, will sail guests to various locations around Italy, Greece, and Croatia, with later visits to France and Spain starting mid-June.
  • July 2021: Carnival’s ultra-luxury cruise line, Seabourn, has been approved by the Government of Greece to relaunch its voyages in the Mediterranean.

As the Covid-19 vaccine continues making its way throughout the globe, allowing for leisurely travel to resume, that should in turn bolster Carnival’s business and stock prospects.

“The question now is whether this party is just getting started and the stock can climb much higher, or has this ship already sailed?”

Much rests on what Carnival’s management conveys today, and how well they can dispel the lingering uncertainties surrounding its business outlook. Carnival’s commentary today could potentially signal the next wave of either buying or selling of this stock, even as most of its fleet remains docked for now.

open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: How Will The Fed React To Bumper US Jobs Report?

The US economy added 916,000 jobs in March, which far exceeded economists’ expectations for 660,000. The US unemployment rate has now dropped to 6%, compared to 6.2% in the month prior.

“This stellar piece of economic data justifies investors’ optimism surrounding the US economic recovery, which is set to further encourage the reflation trade.”

Asian stocks are in the green with Japan’s Nikkei 225 gaining by more than one percent at the open. US equity futures are climbing as well, which potentially paves the way for a new record high for the Dow Jones index and the S&P 500. Note that the latter index closed above the psychologically-important 4,000 mark for the first time in history before the long Easter weekend.

Once that stellar NFP print has been digested, global investors will have more key economic data and market events to ponder upon over the coming days:

Monday, April 5:

  • IMF and World Bank spring meetings begin
  • US factory orders

Tuesday, April 6:

  • RBA policy decision
  • China Caixin services PMI
  • Eurozone unemployment
  • IMF releases updated World Economic Outlook
  • US Treasury Secretary Janet Yellen to speak on IMF spring meeting panel

Wednesday, April 7:

  • FOMC meeting minutes
  • Fed speak: Chicago Fed President Charles Evans, Dallas Fed President Robert
  • Kaplan
  • Eurozone services PMI

Thursday, April 8:

  • Fed Chair Jerome Powell to speak on IMF spring meeting panel
  • Fed speak: St. Louis Fed President James Bullard, Minneapolis Fed President Neel
  • Kashkari
  • ECB meeting minutes
  • Germany factory orders

Markets to keep fighting the Fed?

10-year Treasury yields are now trading about 10-basis points higher compared to levels around the FOMC’s last meeting on March 16-17. With every basis point it climbs, it potentially lowers the bar for the Federal Reserve to intervene.

“If or when the Fed decides to bat down Treasury yields, such an act may trigger a massive bout of volatility across broad asset classes.’

With so much at stake, investors and traders are expected to pay close attention to this week’s commentary out of Fed officials, including the Fed Chair himself, along with the Wednesday release of the FOMC March meeting minutes. The meeting minutes could help offer more insights into policymakers’ views surrounding US inflation, and their biases as to how the Fed should eventually respond. As things stand, benchmark interest rates remain near zero while the central bank continues lapping up $120 billion in bonds per month to help support financial markets.

Fed Chair Powell has long iterated that the US economy remains a long way from a full recovery and that the central bank doesn’t yet see a need to tamper down rocketing Treasury yields.

“It remains to be seen whether Powell, and the other Fed officials, might tweak their tune this week following the latest jobs report. The slightest suggestion that the Fed is ready to curb the surge in Treasury yields, or that they are more comfortable raising interest rates sooner than later, may unwind some of the dollar’s recent gains.”

Dollar defiant

The US dollar has received a boost this year from surging Treasury yields, defying market expectations for a weaker greenback in 2021. The dollar index (DXY) has instead gained by 3.33% so far this year, though it has moderated below the psychologically-important 93 mark as yields soften at the time of writing.

From a technical perspective, the DXY’s 50-day simple moving average crossed above its 100-day counterpart on 26 March, with the index then adding about 0.2% since forming that ‘golden cross’. And with its 14-day relative strength index pulling away from overbought levels, coupled with the momentum indicator that still rings bullish, the DXY may now have line of sight of the November high of 94.31 sometime in Q2.

“Such an upward trajectory for the greenback assumes that the Fed will still tolerate higher Treasury yields, while the US economic recovery and its vaccination efforts can continue at a faster clip compared to Europe, noting that the euro currency accounts for 57.6% of the DXY.”

open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Set To End Week On Positive Note

The dollar index is easing slightly, allowing some reprieve for gold and oil prices.

Although Thursday’s 7-year Treasury auction was met with a dull response again, yields are still some 10 basis points below last week’s peak. Moderating Treasury yields for the week has contributed to the relative calm in equity markets, with the VIX index now back in line with its long-term average around 20.

Steps to normality

Market risk sentiment was buoyed by the lower-than-expected US weekly initial jobs claims, while continuing claims dropped below the 4 million mark for the first time since the pandemic broke out. US stocks also reacted positively Thursday to President Biden’s upward revision to his ambitious vaccination target, which now aims to administer 200 million doses by the end of April.

“Markets have shown that investors’ optimism is predicated on the vaccine’s rollout reaching more of the population, forming the basis for the expected economic recovery.”

The rotation into cyclically-sensitive counters are testament to such hopes, while the euro’s declines against its major peers are testament to persisting concerns over the snags in the EU’s vaccination efforts.

Financial stocks are set to see another boost when US markets open today, having been the best-performing sector on the S&P 500 on Thursday, after the Fed announced plans to ease up on the pandemic-induced restrictions over US banks’ dividend raises and share buybacks. This presents yet another sign that the worst of the pandemic is behind us, as the financial sector takes another significant stride back towards the world we once knew.

“Barring any negative surprises, the Dow Jones index is set to erase its mid-week declines and avoid posting back-to-back weekly declines for the first time this year.”

US personal income and spending prints to influence risk appetite

Investors will be monitoring the February US personal income and spending data due to be released later today. Noting that this print is sandwiched between late December’s $600 stimulus checks and the $1400 payments just approved this month, both personal income and spending levels for February are expected to register declines.

A better-than-expected reading may help ensure that US equities go into the weekend on a positive note.

Market participants must stay on their toes

Still, a fresh major catalyst is needed in order for risk assets to roar higher.

In the interim, market participants will just have to continue contending with major cross-currents affecting risk appetite. From signs that Covid-19 cases are making a resurgence globally, to simmering US-China tensions, amid the shifting expectations for the Fed’s policy outlook, the relative calm in markets could yet be upended by the realization of such risks.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Tumultuous Thursday? Facebook, Alphabet, Twitter Stocks May React To Congress Grilling

Thursday’s virtual hearing before the US House Committee on Energy and Commerce is the latest in a series of regulatory challenges that has besieged social media companies, more so since the deadly Capitol riots on 6th January.

What’s the fuss?

Essentially, Congress wants to hold these social media companies more accountable for the spread of misinformation and disinformation across their platforms. However, these companies are currently able to claim legal protection under the 26 words that make up Section 230 of the Communications Decency Act of 1996. Under this law, these companies enjoy limited liability for the content that users post.

Both Republicans and Democrats want to change that fact, which may adversely impact how these platforms operate. Even US President Joe Biden had spoken about revoking Section 230 in the past.

Tech stocks facing multiple headwinds

Amid such heightened scrutiny, these social media stocks have not fared so well in recent months. The broader selloff in in US tech stocks in the wake of surging Treasury yields and concerns over extended valuations has only compounded matters.

  • Facebook has been trading sideways since registering its highest ever closing price on 26 August. A gust of gains this month has helped its 50-day simple moving average (SMA) avoid colliding with its 100-day counterpart. However, Zuckerberg’s company’s share price remains 7.16% lower from that record high.
  • Alphabet’s stock prices have fared relatively better than Facebook in 2021, though it still has been kept rangebound since posting its record high on 17 February. The stock has fallen 3.91% since then, though appears to be well-supported above the psychologically-important $2000 line.
  • Twitter’s peak on 1 March is the most recent record high compared to Alphabet’s and Facebook’s. Yet, Dorsey’s company has endured a torrid March, having unwound much of February’s gains and has plummeted to its 50-day SMA. Twitter now languishes 20% below its record high.

How markets react to Zuckerberg, Pichai, and Dorsey’s comments today could also have a major bearing on the FXTM Social Media index’s near-term performance. Note that this equally-weighted index comprises shares of Facebook, Google, Twitter, and Snapchat.

How resilient are social media stocks?

To be clear, these social media CEOs have weathered many a grilling by US lawmakers in the past, and their respective stocks have held up relatively well under such scrutiny.

Here’s how they’ve performed compared to key indices on a year-to-date basis:

  • Alphabet: +16.74%
  • Twitter: +14.61%
  • Facebook: +3.29%
  • Snapchat: +0.88%
  • Dow: +5.93%
  • S&P 500: +3.54%
  • Nasdaq 100: -0.69%
  • FXTM Social Media index: +14.64%

How could these legal hurdles impact social media stocks in 2021?

As these regulatory challenges gather momentum, it could translate into stronger headwinds for social media stocks, potentially causing them to lag the broader US market as the year progresses. That would be a far cry from the way these tech giants powered US indexes higher throughout the pandemic in 2020.

This will not be the last that we’ll hear of regulators bearing down on how these platforms go about their business. Depending if, when, or what revisions are made to Section 230, the likes of Alphabet, Facebook, and Twitter may have to eventually incur more operating and legal costs. These social media companies could potentially be exposed to lawsuits from the public too. Investors may then be sensitive to how efforts to remain compliant with the law could weigh on these companies’ bottom line.

“Considering that any revision or perhaps even the revoking of Section 230 won’t happen overnight, shareholders of Facebook, Alphabet, and Twitter may just have to endure a bumpy ride along the way. This added layer of uncertainty may well cap the upside for these social media stocks until this protracted saga reaches its eventual conclusion.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Can The EU’s Tougher Vaccine Export Rules Save The Euro?

The goal is to help the continent ramp up its own vaccination drive, which is somewhat ironic considering that the EU is one of the world’s largest producers of the Covid-19 vaccine.

The bloc’s vaccination rollout far lags behind other major peers. According to Bloomberg data, here’s how the EU fares against the US and the UK in administering at least one dose of the Covid-19 vaccine:

  • EU: 9.1% of its population
  • US: 25.3% of its population
  • UK: 42.4% of its populationAt the current rate, the US needs just 5 more months to vaccinate 75% of its population. The UK is set to accomplish the same within 4 months.

“The EU however would need 17 months before 75% of its population receives the Covid-19 vaccine.”

Vaccination lag, lockdowns weigh on euro

Investors are cognizant of the rationale that economic conditions can take bigger strides towards pre-pandemic levels once enough of the population has the vaccine. The vaccine would inject the local population with more confidence to eat out, travel, and just return closer to life overall as it once was. The slower vaccination rollout suggests that the EU economy would need a longer time to recover and lag behind other major economies.

The lockdowns and other virus-curbing measures that are still in place in major European economies are adding to the currency’s woes. Germany has announced a 5-day lockdown over Easter, while parts of France and Italy have also reimposed tighter restrictions for a month.

Economic data may offer little saving grace for euro’s near-term prospects

Also today, investors will be monitoring the Eurozone’s preliminary PMI readings for March. Although conditions in the manufacturing sector are set to keep expanding and recovering, which is PMI reading above the 50 mark, the services sector is set to continue languishing in contractionary territory.

“Barring a positive surprise in the data, the bloc’s currency is unlikely to find much solace in the economic prints to be released today.”

Such dampened economic prospects are not lost on euro traders. No surprise then that the euro has a year-to-date decline against most of its G10 peers:

“While greater access to Covid-19 vaccines could alleviate some of the immediate selling pressure on the euro, more positive news is needed to restore the optimism surrounding the shared currency.”

EURUSD woes to continue following ‘death cross’

From a technical perspective, it is also difficult to argue for euro strength over the near-term.

EURUSD’s 50-day simple moving average (SMA) has now crossed below its 100-day counterpart. Exactly a week ago, its 30 SMA had crossed below the 100 SMA, forming a ‘death cross’ – a technical event which indicates that more pain for the bloc’s currency could be on its way.

With spot prices on the world’s most-traded currency pair also testing its 200-day SMA and threatening to set a new 2021 low, a significant break below this key support level around 1.184 could mark 1.1750 as the next port of call for Euro bears. Note that the 1.1750 region was also the lower bound for the currency pair’s trading range back in August.

“With momentum still pointing south, coupled with the fact that its 14-day relative strength index has yet to hit the 30 line which is the threshold for oversold territory, it suggests that the Euro has more downside to explore over the immediate term.”

As for the euro index, which is an equally-weighted index comparing the euro’s performance versus the:

  • US dollar
  • Swiss franc
  • British pound
  • New Zealand dollar
  • Australian dollar
  • Canadian dollar

… its downward trend also appears firmly intact, with this index having the tendency to hug the lower bound of its Bollinger band for much of this year.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Central Bank Watch Continues

Markets have been hungry for clues about how the US Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan, intend to adjust their respective policies.

These major central banks have been buying up billions of dollars’ worth of bonds, and even ETFs, to support their respective financial markets. Given the forward-looking nature of the markets, investors are already trying to pre-empt when these policymakers would pare back those bond purchases, and such shifting expectations have rocked multiple asset classes, from US Treasuries, to the Dollar, and even tech stocks on the Nasdaq 100.

“And of course, investors and trader are never fully satiated. Just because the interest rate decisions are over for the time being, doesn’t mean traders and investors can take their eyes off central banks.”

This week heralds a smorgasbord of more speeches and panel discussions by key figures:

Monday, 22 March

  • Fed Chair Jerome Powell speaks at BIS Summit
  • Fed speak:
    – Richmond Fed President Thomas Barkin
    – San Francisco Fed President Mary Daly

    Tuesday, 23 March

  • Fed Chair Powell and Treasury Secretary Janet Yellen to deliver joint testimonies
  • about pandemic response policies
    Fed speak:
    – St. Louis Fed President James Bullard
    – New York Fed President John Williams
  • BOE speak:
    – Governor Andrew Bailey
    – Chief Economist Andy Haldane
    – Deputy Governor Jon Cunliffe

    Wednesday, 24 March

  • Powell and Yellen joint testimonies about pandemic policies
  • Fed speak:
    – Williams
    – Daly
    – Chicago Fed President Charles Evans

    Thursday, 25 March

  • ECB President Christine Lagarde and BOE Governor Bailey speak at BIS Summit
  • Fed speak:
    – Williams
    – Evans
    – Daly
    – Atlanta Fed President Raphael Bostic
    – Fed Vice Chair Richard Clarida

All these scheduled speeches should keep traders and investors occupied over the coming days, especially when it comes to the Fed speak. As I had stated last Friday:

“The slew of Fed speak in the upcoming week could also act as a volatility trigger point, especially if any of the officials offer different views from what had been conveyed by the Fed Chair himself after (last) week’s FOMC meeting.”

Dollar in focus

From a technical perspective, the FXTM USD index has the potential to enjoy more near-term gains, seeing it has yet to reach the upper band of its Bollinger band (black broken lines). The 50-day simple moving average (SMA) is set to act as its immediate support level. Traders will be offered a stronger bullish signal if this USD index can breach its 100-day SMA (green line) and secure a meaningful breakout out of the downward trend (red lines) that has firmly been in place since March.

Note that the FXTM USD index is an equally-weighted index comprising the following major pairs:

  • NZDUSD
  • USDCAD
  • GBPUSD
  • USDCHF
  • AUDUSD
  • EURUSD

Looking beyond the charts, the US Treasury has over US$180 billion worth of notes to be auctioned off this week. Poor demand for these government bonds could send yields skyrocketing even higher!

Those rising yields resulting from the selloff in Treasury markets have in turn encouraged more demand for the US Dollar. The dollar’s recovery has then weighed on demand for precious metals, such as gold, which have an inverse relationship with the greenback.

Should Treasury yields keep rising and offer support for the US dollar, that should ensure that gold bulls are kept on a tight leash, making it harder for them to push spot gold higher.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Feelgood Fed Fades

10-year Treasury yields have posted a new high since January 2020, much to the chagrin of stock market bulls, while the VIX index climbed back above the psychologically-important 20 level.

No rest for the weary

Although concerns over today’s quadruple witching may give rise to heightened volatility before the end of the trading week, unruly bond yields are likely to be the main culprit still going forward. The slew of Fed speak in the upcoming week may also act as trigger points for market volatility, especially if any of the officials offer deviating views from what had been conveyed by the Fed Chair himself after this week’s FOMC meeting.

Jerome Powell & Co. certainly have a fine line to tread in conveying their collective policy bias moving forward, as this high-stakes game of chicken heats up between the Fed and the markets. Despite Powell’s repeated insistence ad nauseum that policymakers intend to look past the green shoots of the recovery and maintain their ultra-accommodative stance, the Fed’s credibility risks being challenged by the economic prints and investors’ seemingly unrelenting expectations for faster inflation.

“It remains to be seen who will ultimately blink, the Fed or Treasury yields. And that eventual swerve by either party is set to cause another massive reaction across global assets.”

With both the Fed and the BOE passing up on the chance to dampen the yields surge this week, bond markets had little qualms in continuing their challenge against the central banks. As long as Treasury yields continue surging higher, tech stocks will likely continue experiencing downward pressure.

Brent futures set for biggest weekly loss since April

Commodities are not being spared from the threat of faster inflation either, with Brent futures plummeting almost 7% on Thursday as the global oil benchmark hurtled towards its 50-day simple moving average. Markets are concerned that inflation rates that are rising too high too fast could in turn crimp global demand for the commodity. Brent futures have now posted a fifth consecutive day of losses, which has shaved off more than 10 percentage points from their gains so far in 2021.

With US stockpiles returning to December’s levels above 500 million barrels, coupled with the IEA’s latest assessment regarding the still “ample” global inventories, traders had already walked back some of the gains in oil benchmarks earlier this week before being slammed by another yields surge. The dollar recovery on Thursday on the back of rising Treasury yields has trimmed Brent’s year-to-date advance down to 23% at the time of writing.

Much of the optimism pertaining to the latest rounds of US fiscal stimulus and OPEC+ output decision had already been baked into oil prices.

“Hence, demand-side factors have to yield further signs of a recovery in order for rent to reclaim the $70 handle level. Still, as the vaccine continues coursing its way throughout the world, with major European countries resuming the use of AstraZeneca’s dose, a sustained global demand recovery is necessary to keep prices relatively buoyed in the interim.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Dovish Fed Pushes Stocks Higher

It’s been a point that Powell had reiterated on multiple occasions already. This time, markets began to pay more heed.

The Fed’s dovish message prompted risk assets to move higher:

  • S&P 500: + 0.29%
  • Dow Jones index: +0.58%
  • Nasdaq 100: +0.38%

The S&P 500 and the Dow posted new record highs respectively, with the latter closing above the psychologically-important 33,000 level for the first time ever. Meanwhile, the tech-heavy Nasdaq 100 notched 3 consecutive days of gains to remain close to its 50-day simple moving average.

At the time of writing, the futures contracts for all 3 major benchmark indices are in the green, suggesting more gains are in store if this sentiment until the Thursday US cash session open, and beyond.

Risk appetite should also stay buoyed, thanks to the Fed’s positive revisions to its economic forecasts:

  • 2021 GDP growth is expected to come in at 6.5%, compared to the prior forecast of 4.2%.
  • Unemployment is set to drop from last month’s 6.2% to 4.5% by end-2021 and 3.5% in 2023.

What’s changed with the Fed’s policy?

In the past, policymakers would try and pre-empt surging inflation by raising interest rates to prevent consumer prices from roaring higher. Then, after a policy review, the Fed announced in August last year that the central bank is now willing to tolerate an inflation overshoot.

Yet, up until recently, markets were of the opinion that the trillions of dollars spent supporting the US economy would result in more inflationary pressures that would force the Fed to act sooner than expected. Judging by the market action in the latest US session, investors and traders are now getting a better handle on the Fed’s messaging which insists that policymakers would not act until there are more concrete signs that a full economic recovery is in sight.

Two doesn’t a tantrum make

There was however a notable change in the number of Fed officials who now see a liftoff in US interest rates sometime in 2023.

During the December FOMC meeting, five of 17 officials held that opinion.

Yesterday, that figure went up to seven of 18.

“The majority of Fed officials still believe that interest rates should remain near-zero at least through 2023.”

That shift in those two FOMC members wasn’t enough to roil risk appetite, with market participants now interpreting this as a clearer runway for risk assets to climb higher, potentially through all of 2022.

Powell remains untroubled by bond yields surge

The yields on 10-year Treasuries had surged to its highest levels since January 2020, even breaching the 1.68% mark temporarily before the Fed’s announcement only to have eased off slightly since.

Despite the wild movements in yields in recent months, Powell took the opportunity to stress that the Fed’s current asset-purchasing programme, which stands at US$120 billion per month since the pandemic took hold, is at the “right place”.

Note that those rising yields on the back of heightened inflation expectations had prompted a selloff from more expensive tech stocks, even pushing the Nasdaq into a brief correction (10% drop from recent high). That also pushed investors into rotating funds into other sectors that are catching up since the pandemic, such as energy and financial stocks, the top two performing sectors on the S&P 500 so far this year.

To be clear, further upticks in Treasury yields are only to be expected moving forward, as yields continue recovering from historic lows.

“But as long as Treasuries act in a calm and orderly manner, and market participants don’t see an obvious need to challenge the Fed’s commitment towards maintaining its ultra-loose policy settings, that would contribute greatly towards a conducive environment for more stock gains.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Over To You, Jay

I couldn’t agree more.

Markets have struggled for clear direction this week, which is often the way ahead of a major risk event as money is taken off the table and new money not put to work.

No change in policy is expected and a substantial shift in tone by the FOMC appears doubtful. This year’s growth and inflation forecasts are set to be upgraded, although the former more than the latter, to reflect a turbocharged recovery and because of the recently approved fiscal stimulus plan.

“Most focus will be on the dot plot projections which back in December suggested flat rates through 2023.”

The better economic outlook, with faster vaccine rollouts and easing of restrictions, might lead to some Fed members bringing forward their rate hike expectations. These individual dots, while still representing the minority view, may grab the attention of markets.

The Fed’s view on higher interest rates up until now has been that they embody economic optimism. Striking a similar tone will potentially spark another bond yield surge which should also give another leg up to the dollar.

Whether that upside is capped by Chair Powell not deviating from the current ultra-dovish stance is a big question. Even when Powell would turn more dovish, the risks for higher rates is clear as the market tests the Fed’s determination if words come out without action.

It’s certainly a communication challenge for the FOMC at today’s meeting and most watchers hope the message is calibrated so as not to rock the already fragile bond market, and with it global risk sentiment. In which light, there may well be some technical tweaking with the Fed extending its US Treasury exemption from the Supplementary Leverage Ratio (SLR) as failing to do this is likely to push bond yields higher and see a selloff in stock markets.

Markets are fairly quiet this morning although the US 10-year yield is pushing above 1.67% to new cycle highs. The monthly fund manager survey by Bank of America released recently pointed to 2% being the level which the majority of respondents said would spark a 10% correction in stocks.

Any further dollar support might see EUR/USD test the current 2021 low around 1.1835, which is also the area where the pair’s 200-day simple moving average currently resides. A clear and sustained break could then mean a return to the sideways 1.16/1.20 trading range.

EUR/USD daily

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Can Nike’s Share Price Cross the “Jordan” to New Record High?

Nike has enjoyed a stellar rise since the market rout 12 months ago, rocketing 130% since 23 March 2020.

However, that momentum has stalled since registering its highest ever closing price on 11 January 2021, as the stock has remained in a sideways pattern in the two months since. Nike’s year-to-date gains now stand at 2.25%, lagging behind the 7.25% posted by the Dow Jones index and the S&P 500’s 5.5% added so far in 2021.

From a technical perspective, Nike’s share prices are testing the upper limits of its Bollinger band, with momentum indicators turning bullish. Nike bulls would take heart from the stock’s ability to breach the $145 resistance region temporarily on Tuesday, posting a higher high from February’s levels.

You could almost hear Nike bulls cheering the stock on with roars of the company’s slogan, “Just Do It”!

But in order for the stock price to stay up there, or even post a new record high, Nike may need a positive catalyst. And such a catalyst may arrive after markets close on Thursday.

What are markets expecting for Nike’s FYQ3 earnings?

  • Revenue: 9% year-on-year increase to US$11 billion
  • Net income: 11.1% y/y increase to US$1.22 billion
  • Adjusted earnings per share: 4% y/y increase to 76 cents

Nike’s sales growth is expected to be largely powered by the Greater China region, which may have registered a 30% expansion in revenue, according to Bloomberg Intelligence. No surprise there, given China’s 33.8% year-to-date retail sales expansion that it announced on Monday, although the comparison with the same period last year is heavily distorted due to the fact that China was in lockdown in the initial months of 2020.

As of end-November, Greater China contributed about 20% to Nike’s total revenue, which is two percentage points higher than the same period in its 2020 financial year. The US remains Nike’s largest market, accounting for over a third (35%) of total sales in its fiscal second quarter.

Nike’s digital push paying off

Nike’s digital push, a move that was announced back in 2017 to make the company less reliant on brick-and-mortar stores, also helped counter the negative effects from store closures. Digital sales are expected to register another period of double-digit growth, even though the company already stated that more than 90% of Nike’s stores have been open as of their previous quarterly report on 18 December.

Macroeconomic headwinds may weigh on Nike’s fortunes

However, note that the forecasted 9% expansion in the company’s top line for the period may be slightly too optimistic, considering some lackluster macroeconomic data.

During the quarter, the production volume of apparel and leather in the US actually fell 0.5 percent. Also, the February US retail sales data that was just announced on Tuesday came in lower-than-expected, registering a 3% month-on-month contraction compared to January’s revised 7.6% expansion from the month prior. December’s US retail sales also recorded a month-on-month decline of 1.3%.

Noting the broader industry’s declines between December and February, that may colour Nike’s fortunes for the reporting period.

How does Nike’s share price tend to react after its earnings release?

Nike shares have posted single-day advances after three of the past four quarterly earnings releases. Using a longer timeframe, since 2010, the stock has averaged a single-day move of about 5% after its quarterly results were announced.

Keep in mind that Nike is now a mere 1.37% away from its highest ever closing price of $146.79.

Hence, a positive earnings surprise, coupled with a healthy amount of risk appetite in broader markets, could well see a new record high for Nike by the end of the week, provided that the forecasted 5.5% move actually materializes to the upside.

With more of the global economy shedding virus-curbing measures, the world is inching closer towards seeing spectator-filled sports arenas and more live sporting events being broadcasted. That may serve as a tailwind for Nike’s earnings and its share price performance over the coming months.

For more information, please visit: FXTM

Written on 17/03/2021 07:00 GMT by Han Tan, Market Analyst at FXTM

Disclaimer: This written/visual material is comprised of personal opinions and ideas. The content should not be construed as containing any type of investment advice and/or a solicitation for any transactions. It does not imply an obligation to purchase investment services, nor does it guarantee or predict future performance. FXTM, its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness of any information or data made available and assume no liability for any loss arising from any investment based on the same.

Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% 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.

Dow and S&P 500 Hit New Record Highs. More Gains In Store?

traditional indices such as the Dow Jones index and the S&P 500 that are laying claim to such achievements.

“US stock markets kicked off the new trading week on a feel-good note.”

Investors continue to grow more optimistic about the economic outlook, thanks to President Joe Biden’s $1.9 trillion fiscal stimulus package and the continued dissemination of the Covid-19 vaccine. Despite several European countries pausing the rollout of the AstraZaneca vaccine, market participants were able to look past such concerns, with such setbacks hopefully temporary.

Dow flirts with 33,000

Respectively, the Dow and the S&P 500 reached their highest closing prices ever. The 125-year-old Dow Jones index was propelled higher on Monday by consumer discretionary stocks such as McDonald’s and Nike. The Dow has now notched 7 consecutive days of gains, its longest winning stretch since August.

The Wall Street 30 minis are now just shy of the psychologically-important 33,000 line. Although the momentum indicator still points to bullish sentiment, its 14-day relative strength index denotes overbought conditions have been reached. That suggests that a healthy and necessary pullback could be in order over the immediate term.

Still, the Dow appears well supported amidst the reflation trade, as the index continues being guided upwards by its 50-day simple moving average (SMA).

S&P 500 soars with 4,000 level in sight

The S&P 500 has recorded its 5th straight daily advance. This blue-chip index was boosted by aviation counters such as United Airlines and American Airlines, which climbed 8.26% and 7.7% respectively on Monday. Intriguingly, the top two-performing sectors on the S&P 500 on a year-to-date basis, namely financials and energy, were the only sectors to post declines yesterday.

As long as investors can remain confident that the world is taking further positive strides towards the post-pandemic era, the S&P 500 looks set to attain the 4,000 handle in the immediate future, with such a psychologically-important level just less than one percent away.

Nasdaq rebound to encounter technical and rotation resistance

Much has been made about the spike in Treasury yields roiling global equities, especially for the more expensive tech stocks. Hence, the fact that the 10-year yields climbed back down below the psychologically-important 1.60% has allowed some breathing space for this sector.

The Nasdaq 100 advanced 1.12% on Monday, pushed higher by some usual suspects:

  • Apple: +2.45%
  • Tesla: +2.05%
  • Facebook: +1.99%

The Nasdaq 100 minis look set to test their 50-day SMA, with stronger resistance set to arrive around the 13,350 region. A breach of the 13,350 mark would be a notable technical event, as it would mark a higher high from the resistance levels that proved resilient in late February through early March.

“Still, tech stocks are expected to struggle under the weight of the ongoing rotation from more expensive tech stocks to other sectors that are now playing catch up.”

What could push US stocks higher today?

Investors will be keeping a close eye on Tuesday’s key US economic data releases:

  • retail sales (February)
  • industrial production (February)

Wall Street is expecting a 0.5% contraction in February’s retail sales compared to the month prior, as the boost from January’s stimulus checks faded while freak winter storms wreaked havoc on spending patterns in several states. Still, with more stimulus checks being sent out to US households this week, investors are likely to hold on to their optimism and expect another positive bump to US retail sales for this month.

Meanwhile, last month’s industrial production is set to register a 0.3% month-on-month increase, which would be its lowest reading since September’s negative print, with February’s weather disruptions set to be taken into account.

“Overall, better-than-expected data could spur more risk-taking appetite, potentially pushing US stock indices to fresh record highs ahead of Wednesday’s keenly-awaited Federal Reserve meeting.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: Central Banks VS. Bond Yields

  • Wednesday, March 17: Federal Reserve
  • Thursday, March 18: Bank of England
  • Friday, March 19: Bank of Japan

“Arguably, the single focus that investors will have is whether policymakers will deliver overt signs that they are willing to intervene and tamper down the spike in government bond yields.”

In recent weeks, we have written about how markets have been testing how much major central banks will tolerate rising yields. So far, markets are “winning”.

10-year Treasury yields hit a fresh high last week, closing above the psychologically-important 1.60 mark for the first time since February 2020. Yields on the 10-year gilts are at their highest levels since December 2019. Japan’s 10-year yields matched an October 2018 peak of 0.15 percent before moderating since, though still remains within the BOJ’s target range.

Why are government bond yields rising?

Central bank officials from the Fed and the BOE insist that those rising yields (which happens when investors sell off bonds and bond prices decline) are a sign of investor optimism surrounding the respective recoveries for the US and UK economies.

However, investors and traders have a differing opinion. They believe that inflation will make a roaring comeback considering the US$9 trillion in support that central banks have rolled out, coupled with an additional US$14 trillion in fiscal support from governments. More importantly, markets think that inflation will actually stick around, compared to the stubbornly meek price pressures before the pandemic.

Faster inflation could then see central banks tapering their stimulus support and eventually hiking interest rates sooner than expected in order to rein in raging price pressures.

Why are rising yields problematic for the economy?

Higher yields could lead to tightening financial conditions, which means that the flow of cheap money that had been rolled out since the pandemic becomes more expensive. And the tightening of financial conditions risks derailing the economic recovery, as households and businesses become less inclined to embark on debt-fueled economic activities.

How have markets reacted to the yields spike?

Investors have been selling off bonds at a drastic pace, which is causing those bond yields to rise. Those surging yields have also hurt tech stocks, while boosting sectors that have lagged since the pandemic, such as stocks in the energy and financial sectors.

This rotation sent the Dow Jones index and the S&P 500 to new record highs respectively on Friday, while the Nasdaq 100 still languishes 6.3 percent below its all-time high which was registered on 12 February.

Assets to watch this week

The futures for the DowS&P 500, and the Nasdaq 100 are in positive territory at the time of writing, suggesting gains when the US cash session opens on Monday.

Traders are set to react to any notable commentary from either the Fed, BOE or BOJ this week about government bond yields, especially statements that deviate from market expectations and indicate that these major central bankers are willing to stamp out unwarranted yield spikes.

“Should markets actually believe the central bank’s rhetoric, that may dampen yields which could alleviate the selling pressure in tech stocks. Lower government bond yields relative to their peers could lead to declines for that nation’s currency, with the US dollar, the British pound, and the Japanese Yen in focus over the coming days.”

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Key Events This Week: US Inflation Still All The Rage?

Asian stock markets are pushing higher, with futures contracts for the Dow Jones index and the S&P 500 following suit.

“Hopes for more fiscal stimulus have been a bedrock for stock market bulls since last year, though now it could feed into heightened expectations that US inflation could come back with a vengeance, thanks to the trillions that the US government and the Fed have poured into the economy.”

Here are some other key events and economic data that markets will be eyeing this week:

  • Monday, 8 March: BOE Governor Andrew Bailey speech; Germany industrial production
  • Tuesday, 9 March: Eurozone GDP (final reading); Germany external trade
  • Wednesday, 10 March: US inflation
  • Thursday, 11 March: ECB rate decision (President Christine Lagarde comments)
  • Friday, 12 March: UK GDP and industrial production; Eurozone industrial production; US consumer sentiment and producers price index

Key themes

  • US inflation expectations meets reality

Surging Treasury yields have spelt turmoil for global financial markets in recent weeks. As the story among investors goes, faster US inflation should bring forward the Fed’s eventual raising of interest rates. Such expectations prompted traders to ditch US Treasuries, which in turn sent yields soaring and also roiled global equities, especially more expensive tech stocks.

The Nasdaq 100 has endured three consecutive weeks of declines. However, it did manage to avoid a technical correction, which would have been 10% down from its record high in February, thanks to the buy-the-dip market action on Friday.

“More selling of tech stocks could make precarious the Nasdaq 100 minis’ position above the 100-day simple moving average (SMA). The asset could then break below last Friday’s 12,212 support level, which was also a key region on several occasions in Q4 2020. To the upside, the 12,750 support-turned-resistance level is also one to watch for the immediate term.”

At the time of writing, futures for Nasdaq 100 are tipping into the red and resting on their 100-day SMA.

“Much could depend on how Treasury yields fare in light of the imminent fiscal stimulus injection, and also around the mid-week release of the US February consumer prices index.”

Should both events point to US inflation making a roaring return, that could exert more downward pressure on the Nasdaq 100. However, a softer-than-expected CPI could dampen yields and offer tech stocks some breathing space.

Investors would also have to juxtapose Wednesday’s backward-looking CPI with Friday’s forward-looking US consumer sentiment data. Should Americans be found raring to spend once more to overcome lockdown fatigue, that could translate into heightened inflation expectations and another surge in Treasury yields, while prompting further losses in the Tech sector.

  • Will BOE, ECB react to rising yields?

With Fed members entering their blackout period ahead of the mid-March FOMC meeting, investors will be looking to the commentary by BOE Governor Andrew Bailey on Monday, as well as Thursday’s speech by ECB President Christine Lagarde after the European Central Bank’s policy meeting.

Global central bankers have been growing concerned that rising bond yields could tighten financial conditions, which could ultimately disrupt their respective economic recoveries.

“Should either central bank official successfully dampen their respective bond yields and widen the gap with Treasury yields, that could weigh on their respective currencies while lending a further boost to the dollar index (DXY).”

Note that the euro and the pound are the first and third largest constituents respectively on the DXY. Combined, the euro and sterling account for nearly 70% of the dollar index.

And should the GDP and industrial production readings from either side of the English Channel disappoint markets this week, that could further buffer support for the greenback which has been enjoying a resurgence of late, thanks to rising Treasury yields and also last Friday’s better-than-expected jobs report.

Open your FXTM account today


Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.