Headlines

* BoJ’s Ueda vows to keep rates low for now signals chance of future hike

* First Republic to cut a quarter of jobs after losing 40% of deposits

* Euro continues to shine as hawkish ECB hike looms

* Stocks waver, dollar softens as investors weigh earnings, data

FX: USD broke down as it looks to be heading towards 101 and below. Dalles Fed manufacturing disappointed which stoked fears about a US economic slowdown. Strong support from the February low on the DXY sits around 100.82.  The 2-year yield dropped below its 200-day SMA at 4.10%. The 10-year yield also sank below its 200-day SMA at 3.55% and the psychological level of 3.50%.

EUR led the majors as it advanced north above 1.1032, the late January high. The April top is at 1.1075. ECB comments continued to be hawkish. Schnabel noted that a 50bo hike next week is not off the table. GBP closed on its highs and above the January peak at 1.2447. USD/JPY continued to trade sideways in a narrow range. BoJ Governor Ueda indicated that a policy tweak was highly unlikely this week. The 50-day SMA at 133.78 acts as initial support. The AUD is softer and threatening to roll over towards 0.6650. Price action has been choppy on ANZAC Day.

Stocks: US equities seesawed as investors digested Q1 earnings and eyed big tech results over the coming days. The benchmark S&P 500 closed up 0.09%. The Nasdaq 100 slid 0.24%. The Dow finished 0.20% higher. Shares in Coca-Cola edged lower after the beverage giant reported net revenue growth of 5%. Regional banks were in focus after First Republic shares collapsed after the bell down over 20%. Customers pulled more than $100bn of deposits last month amid the banking turmoil. Poor risk management and a lack of leadership are being blamed.

Asian stocks were mostly lower after mixed Wall Street performance. The Hang Seng underperformed led by tech as the index fell below 20k. The Nikkei 225 was in the green after Ueda repeated he intends to maintain easy policy given the current environment.

US equity futures are lower with First Republic results not helping sentiment. European equity futures are pointing to a softer open (-0.3%). The cash markets closed lower by 0.2% yesterday.

Gold is up for a second day this morning as it tries to regain $2000.

Day Ahead – Earnings avalanche incoming

Q1 earnings is under way with around 20% of the S&P500 companies having reported. The benchmark index is on track for an EPS decline of 7.3% compared to the Bloomberg preseason estimate of 8%. Beat rates are better than average with 77% of the reports surpassing EPS forecasts. That is above the five-year pre-pandemic average of 73%.

We get the widely watched FANG stocks reporting over the next few days. Alphabet, Microsoft, Meta, Amazon and Apple (who annouce next week) account for nearly half of the Nasdaq 100. They’ve led the market on both directions pretty much continuously since 2008. While this year, Bloomberg data says seven megacap tech stocks contributed 88% of the S&P500’s 7.7% gain. It’s a huge week with big expectations.

Chart of the Day – Make or break for the S&P 500?

The ascending bull channel in the blue-chip index since the March low has been impressive. The rally has broken above long-term moving averages which will all offer strong support around 4,000. Above that, the falling trendline from the March 2022 high could also offer support around 4080.

Buyers have stepped in over the last couple of days to keep within the channel. But the index has tracked sideways recently. Near-term resistance is 4169 ahead of the year-to-day high at 4195.