Overnight Headlines

*USD trades in a narrow range, near weekly high

*US equities snap three-day losing streak on Fed speak

*Oil drops nearly 3% on reopening of Colonial pipeline

US equities were soothed by Fed speakers overnight who reassured markets about the transitory nature of inflation and signalled rates won’t rise until policymakers see inflation either above target for a long time or excessively high. The rally was led by small caps, chipmakers and transportation providers – firms that stand to gain on the reopening of the economy. US futures are in the green although the S&P is on track for its worst week since late January.

USD printed a “doji” candle where prices open and close at virtually the same price (90.74/71) and signals some indecision which is unsurprising after the big bullish move following the US inflation data. Prices are being capped this week by a Fib level at 90.81 so today’s reaction to the retail sales numbers will be key.

Market Thoughts – US data to round off volatile week

With market jitters over rising prices across the globe being calmed by Fed officials and a need to take stock as much as anything, we have more data to focus later today. Analysts expect a reading of 1.1% in US retail sales after the huge 9.8% increase in March. Stimulus, the reopening of the economy and the recovery of the labour market should all help retail activity with the checks from March being carried over into April.

It’s been quite a wild week with bond yields jumping higher and sparking the rally in the dollar and further selloff in stocks. However, Fed officials are sticking to the party line so far and do not expect inflation to be persistent. One area of note on Wednesday’s CPI report was the index for used cars and trucks which rose a huge 10% in April, accounting for over a third of the seasonally adjusted increase. Is this kind of buying activity sustainable as lower paid workers use up their savings to purchase second-hand vehicles?

Chart of the Day – FTSE 100 prints bullish candle

Having made new cycle highs on Monday, the FTSE100 has suffered this week with Wednesday’s plunge taking the index back below the psychological 7,000 level. It was looking to be another ugly day with the sharp open lower in the first hour yesterday, but buyers came in throughout the day to lift stocks and they closed above the upward trendline from November. The daily chart shows a big bullish hammer candle with prices closing just off the highs of the day. The 50-day SMA proved good support too with prices retracing after touching this. If the bulls can beat Tuesday’s high at 7028 and the mid-April peaks, then the long-term bullish channel remains intact.