April 14, 2021 12:35:46

Headlines

* Equities close to record highs, tech outperforming

* USD off worse levels of the day but suffering

* JPM starts earnings season with blowout quarter

US stock index futures are modestly higher with an “all news is good news” feel to the markets. The delay of the J&J vaccine has been brushed aside in many senses as technology and healthcare sectors lead the way.

USD is unloved as lower bond yields are sending investors to other high-yielding currencies with NZD and AUD leading the way. The recent break of support around 92 in USDX should see more downside.

Market Thoughts

European stock markets are trading close to their record highs this morning as shares that benefit from lockdowns and working form home (read Technology!) are being bid up. This turns the leadership in equity markets on its head somewhat and is a reaction to the negative J&J vaccine news and the potential delay in the reopening of economies.

With the “not too hot” US inflation data out of the way, all eyes are on the start of the earnings season which has properly kicked off today. Watch for forward guidance from companies that tells us about the expected future path of growth as this may more important than the actual results themselves. Any talk about price pressures that offer anecdotes regarding the pass-through, especially in the next few weeks across industries after the big banks have reported will also point the way for the post-lockdown stage.

Charts of the Day

The Nasdaq has regained its recent losses over the past few weeks to hit new highs overnight. A setback in the vaccine rollout has seen renewed demand for pandemic winners, fuelling gains in tech stocks.  Speculative names like Tesla have also surged once again, which begs the question – how long will this last? Of course, earnings will point the way with those companies benefitting from the reopening of the economy like consumer stocks and financials set to report blockbuster results and bulls expect this to keep the market going higher.

Since falling to 12,207 at the start of March, the Nasdaq has bounced close to 15% and strong momentum can push the index further north. Prices are touching the upper Keltner bands which warrants some attention, but it would seem the path of least resistance is for more records to be broken.

With the dollar losing steam,the EUR is managing a recovery even as the fallout from the vaccine news potentially hits the continent more than other regions. Contagions in Germany are rising at their fastest pace since early January and the most recent business survey showed a less optimistic outlook for investors than forecast.  

There’s a cluster of resistance ahead in EUR/USD around 1.1950/90 including an important Fibonacci level (38.2% of the entire 2021 fall at 1.1950), the mid-March highs at 1.1990 and the 50-day moving average at 1.1974. This zone may cap more upside with the 100-day moving average above at 1.2060. Bears would prefer to see a move below the recent low around 1.1860 to see a small top complete.

Key Events

Fed Chair Powell speaks later today and the employment report out of Australia overnight will get attention. Economists expect 35k jobs gained and unemployment falling a tenth to 5.7%. Leading indicators suggest labour demand continued after the cracking February report: employment rose 88.7k, all of which were full-time jobs.