Overnight Headlines

*US 5-year yield tops 3% after Nomura predicts 75bp Fed hikes

*Fed’s Powell, half-point hike in view, completes hawkish pivot

*UK consumer confidence plunges to near record low in April

*Japan and US likely discussed joint FX intervention

US equities retreated amid rising bond yields and busy earnings reports. Cyclicals and specifically growth and richly valued ones got sold heavily. The Dow closed lower -1.1%, S&P500 -1.5% and Nasdaq -2.1%. Rising short end rates were the real knock-out blow with Fed Chair Powell’s comment on the chance of a larger-than-usual rate hike next month. The Japanese Nikkei is leading Asian bourses lower. US futures are mixed, European futures pointed lower.

USD eventually finished the session stronger after a choppy day. DXY dipped below Fib support just above 100 before closing at 100.62. EUR surged to a high of 1.0936 before dropping sharply. GBP pushed up to a high of 1.3089 before also falling back. USD/JPY saw bullish consolidation around 128. AUD gave up all of the previous session’s gains. It closed more than 1% lower and has broken through support at 0.7342/43 this morning.

Day/Weekend Ahead – PMIs and French Presidential Election

It’s been a topsy-turvy week with risk sentiment souring late yesterday. Fears are again rising about a recession triggered by sharply tightening monetary policy. Today sees the release of global PMIs covering the euro area, the UK and the US. The data is set to weaken as the Ukraine conflict unsettles confidence and supply chains. Chinese covid restrictions could also weigh.

Sunday sees the French presidential election run-off which may affect markets on Monday morning. Polls still favour the incumbent Macron, with left-wing voters acting as kingmakers. A Le Pen victory would be a major shock to markets. But France faces rising headwinds from the cost-of-living crisis and political fragmentation. Did we see the Macron bounce yesterday in EUR/USD? This week’s high could act as resistance.

Chart of the Day – Nasdaq looking weak into next week’s earnings

We wrote two weeks ago about the tech-laden US index coming under pressure after hitting SMAs. The 100-day had just crossed the 200-day SMA above 15,000.

Since then, the Nasdaq has fallen to 14,000 but been consolidating this week. This now looks bearish as prices moved below recent support around 13,900 yesterday. Next support is 13,504 and then the March low at 13,020. Resistance sits around the 50-dat SMA at 14,220. We get more FAANG results next week with Facebook (Meta), Apple and Amazon reporting.