Headlines

* Meta surges as sales, forecasts beat estimates on ad recovery

* Republicans spark debt-ceiling bill aiming to spark talks with Biden

* Euro near one-year peak as US economic risks weigh on USD

* Asian shares sink on US banking and growth fears

FX: USD was mixed but keeps getting sold anywhere near 102 on the DXY. The index closed 0.4% lower and remains in a medium-term downtrend. Dovish repricing of the Fed with rate cuts being priced back in are hurting the greenback. The 2-year yield steadied just under 4% after two days of sharp losses. The 10-year yield picked up slightly but remains below the psychological level of 3.50%.

EUR traded to an intraday high of 1.1095 before closing at 1.1041. GBP went as high as 1.2515 before closing below 1.25. USD/JPY ended the day lower at 133.67. It is still trading around the 50-day SMA at 133.76 ahead of the BoJ policy meeting tomorrow. AUD settled at 0.66 after Tuesday’s big break down. USD/CAD is consolidating above 1.36 after six straight days of gains. The BoC minutes showed discussion focused on whether policy was restrictive enough. There was also talk on if it was best to raise rates or wait for more evidence.

Stocks: US equities closed mixed. The benchmark S&P 500 finished lower 0.38%. But the Nasdaq 100 closed 0.72% higher. It was kept in the green after recent tech results. These have been followed by better than expected after the bell numbers from Meta and eBay. The Dow finished down 0.68%.

Asian stocks were relatively subdued amid banking sector headwinds. The Hang Seng was mixed with the biggest movers driven by earnings. The Nikkei 225 was cautious with headlines dominated by the BoJ and company results.  

US equity futures are in the green with tech leading the way again. European equity futures are indicating a weaker open (-0.3%). The cash markets closed lower by 0.7%. The index hit a high of 4411 on Monday, a level closely topped in November 2021 at 4415.  

Gold ongoing battle with $2000 continues. The $1969 to $2015 range remains.

Day Ahead – Banking sector concerns linger

Fears over the state of regional banking sector in the US continue to dog the wider market. First Republic Bank is reportedly facing a curb on Fed borrowing as the regulators consider lowering the bank’s rating if a deal is not reached to rescue the bank.

The bigger implication this week is that lower volatility in bond markets and stocks is no longer enough to drive equities higher. Strong tech reports are so far not enough to lift the benchmark S&P 500, though futures are again in the green. It seems growth stocks are outperforming due to the earnings turnaround and not on lower yields. The market could wake up to these lower bond yields if the banking sector woes calm. US GDP is released later with fairly solid growth expected.

Chart of the Day – Amazon capped by 200-day SMA

Next up on the megacap FANG reporting roster is Amazon who release their results after the closing bell. Their revenue is expected to continue rising despite the slump in demand for ecommerce. Its cloud-computing arm, subscription services and its small but fast-growing advertising business are forecast to carry on growing. But costs are increasing at a faster rate amid contracting margins. This is expected to cause Amazon’s EPS to fall for a seventh consecutive quarter. Amazon Web services will be in focus with estimated revenue growth of 14%. That is less than half the rate of growth we saw last year.

Prices have drifted higher since the mid-March low at $88.12. The upward channel popped up to $109.23 and above the 200-day SMA at $106.85. The last two days have closed below here so that will act as strong resistance. We note the 200-day SMA capped prices in August 2022 and at the last Q4 results in February. Close above and bulls will target $114. Support is $98.65.