Stock futures higher on Big Tech earnings beats, eyes on BoJ and US prices

Headlines

* Wall Street falls as weak GDP and high inflation spreads rate-cut gloom

* Alphabet surges after strong revenue and first dividend, Microsoft beats on AI growth, cloud strength

* BoJ expected to keep policy steady but risks further yen weakness

* US Core PCE deflator could come in hotter after stronger annual figure

FX: USD printed lower at the end of a volatile day of trading. Prices initially sold off in the morning session but that changed after the US data. GDP unexpectedly collapsed to a two-year low of just 1.6% from the prior 3.4% and 2.4% expected. But the real kicker was the all-important core PCE element which soared from 2% to 3.7%. This poses strong upside risks to today’s inflation print.  Prices eventually finished down on the day at two-week lows. Money markets now price in around 36bp of Fed rate cuts for this year. This was more than double just a month ago.

EUR manged to stay in the green after a whippy time around the US data. Prices got to a ten-session high at 1.0740 before pulling back. A June rate cut isn’t fully priced in yet with around 18bps seen.

GBP climbed above 1.25 as cable rallied for a third straight day. There’s been more balanced BoE commentary this week. Governor Bailey’s recent relatively dovish bias is being seen as out of sync with the prevailing macro picture. Next major resistance above is 1.2566.

USD/JPY continued higher through the purported “line in the sand” at 155. The major made another fresh cycle peak at 155.74. Speculation is rife about intervention, with the speed of the move (“disorderly moves”) potentially not worrying officials enough to intervene. Eyes are on Governor Ueda and Tokyo CPI.

AUD traded up to a high of 0.6538, again very close to the 50-day SMA. But sellers emerged to beat it back down to 0.65. USD/CAD eventuallysettled near its lows, at a two-week bottom near 1.3650.

Stocks: US equities were hit by the double whammy of a plunging Meta after its results, plus very mixed data. Hot inflation combined with slower growth, which meant stagflation fears grew louder. The broad-based benchmark S&P 500 finished 0.46% lower at 5048. The tech-laden Nasdaq 100 lost 0.55% to close at 17,430. The Dow Jones underperformed again, losing 0.98% to settle at 38,085. Stocks opened on their lows for the day before clawing back losses. All eleven sectors were initially down before five closed in the green. Meta finished 10.6% lower after its disappointing quarterly update. Futures rose after Microsoft and Alphabet were bid up after the close and their results. The former climbed over 4% as cloud growth accelerated on the back of the AI push. Google’s parent jumped 14% on an earnings beat and the company’s first ever dividend with a $70bn buyback.

Asian Stocks: APAC futures are mixed. Markets were muted after the tepid Wall Street handover. US futures were also pressured by the META collapse. The ASX 200 was closed for ANZAC day. China indices were in the green with resilience in the property sector in Hong Kong. The Nikkei 225 underperformed, moving above 38,000 on tech weakness.

Gold moved higher though prices continue to trade around the first Fib level (23.6%) of this year’s rally at $2326. The 10-year Treasury yield posted fresh cycle highs above 4.70%.

Day Ahead – BoJ meeting and Us Core PCE Data

The Bank of Japan meeting is widely expected to keep policy measures unchanged. Rate-setters are likely to proceed very gradually after the symbolic move out of NIRP at the last meeting. Private consumption remains weak and there is continued uncertainty about SMEs. Attention will be on the quarterly outlook report, with inflation projections likely to be revised higher. Governor Ueda’s tone in his press conference will be key. He has recently turned more hawkish due to the weaker yen. Any talk about the currency with its protracted weakening will also be watched, plus any reduction in monthly JGB purchases.

The US Core PCE data for a March reading was initially forecast at 0.3% m/m and 2.8% y/y. This is lower than the CPI prints. But yesterday’s strong prices figures imply hotter numbers. A print of 0.4% should trigger more dollar strength, though worries about growth may hinder major upside until next week. That’s when we get the FOMC meeting and monthly US jobs report.

AUTHOR

Jamie Dutta >

Jamie Dutta is a Market Analyst for Vantage. He comes with extensive experience as a full-time trader and financial market commentator, having worked as a trader in top tier investment banks and trading houses.