April 20, 2021 13:11:17
Headlines
* US stock futures dip and European stocks off record highs for second day
* USD trying to find comfort in rising bond yields
* Netflix and IBM report quarterly earnings
US equity futures are tracking European bourses lower as worries over rising virus cases in the developing world continue to dog the markets. The main European stock index is suffering its biggest drop in a month as enthusiasm for the global growth rebound wanes.
USD is desperately trying to stop the rot as the USDX looks to its 100-day moving average to stave off more selling. Several of the majors are trading around key levels – GBP 1.40, EUR 1.20, JPY 108, AUD 0.78 – so may face some resistance in the short term.
Market Thoughts – Earnings need to run hot
Earnings out of the US ramp up with tech-related firms like IBM and Netflix reporting today. The former gained in pre-market as it reported its biggest revenue gain in 11 quarters, boosted by bets on the high-margin cloud computing business. Netflix report after the close and will shed light on how the blockbuster winners of the stay-at-home pandemic have fared.
After stellar bank earnings last week, analysts expect first quarter profits for all S&P500 firms to jump nearly 31% from a year earlier. Expectations are high then already and it will be up to Netflix especially, as the first FAANG reporting, to keep the positive momentum going.
Chart of the Day – Balancing act for Bank of Canada
To taper or not to taper, that is the question? Analysts seem to be torn on this question of whether the BoC who meet tomorrow at 1400 GMT begin to buy less bonds and kick start the process towards more normal monetary policy. Some sort of roadmap is expected about adjustments to policy with consensus going for a tapering of the QE programme. The housing market is red hot, jobs data is impressive and oil prices on the march. However, infection rates are up and Ontario is back in lockdown.
Risks seem skewed to disappointment with regard to USD/CAD as the FX market is leaning towards a taper of CAD1 billion per week so anything more than this will see more downside in USD/CAD and push the pair below near-term support around 1.2471. A consensus move would likely leave CAD exposed on the flip side and push the pair back towards 1.2600/25. New forecasts are issued by the BoC so these will also sway sentiment.
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