US equity futures rose, putting the S&P on pace for its first gain after 6 straight days of losses, as focus shifted from Middle East tensions to a raft of company earnings this week, including four of the Mag7 tech megacaps which got hammered last week. At 7:40am, S&P emini futures gained about 0.5% after the index recorded its worst week since March 2023; Nasdaq futures were 0.6% higher while Europe was green across the board. Demand for havens eased as traders took comfort from the absence of further escalation from Iran following Israel’s retaliatory strike. A Bloomberg dollar index was steady as geopolitical tensions eased and the Fed entered a blackout period before its May 1 policy decision, while the yield on 10-year US Treasury yields rose three basis points. Oil reversed an earlier slide while gold dropped around 1.4% as demand for haven assets fades.
In premarket trading, Nvidia rebounded almost 3% after the artificial intelligence favorite shed nearly $212 billion of its market capitalization in Friday’s broad tech selloff. Salesforce rose 3.6% after Bloomberg reported that takeover talks with Informatica have cooled. Retail wireless provider Verizon advanced after an earnings beat. On the downside, Tesla, which is set to report earnings on Tuesday, dropped 3% as the automaker’s decision over the weekend to slash prices across its range in China risks sparking another round in the nation’s bruising electric-vehicle price war. Here are some other notable premarket movers:
Even though a military base in Syria belonging to a US-led coalition came under rocket-fire late on Sunday, in the first attacks against US bases in the Middle East since early February, the lack of further escalation between Isreal and Iran eased fears about military conflict in the Middle East accelerating.
“We are seeing a relief rally underway this morning as geopolitical risks subside,” said Kyle Rodda, a senior market analyst at Capital.com in Melbourne. “The move basically squares the ledger now and allows the markets to go back to focus on macroeconomic and corporate fundamentals."
Robust earnings from corporate America are expected to pull the S&P 500 Index out of its latest morass, despite rising concerns about a significant jump in bond yields, according to Bloomberg’s latest Markets Live Pulse survey. Nearly two-thirds of 409 respondents said they expect earnings to give the US equity benchmark a boost. That’s the highest vote of confidence for corporate profits since the poll began asking the question in October 2022.
Profits for the seven biggest growth companies in the S&P 500 — Apple, Microsoft, Alphabet, Amazon.com Inc., Nvidia Corp., Meta and Tesla — are on course to surge 38% in the first quarter, according to Bloomberg Intelligence. When excluding them, the rest of the benchmark index’s profits are anticipated to shrink by 3.9%.
Traders are also recalibrating their positions after a solid run of US data forced the Fed to reset the clock on its first interest rate cut. Data prints later in the week are likely to help finesse policy bets, with both US growth and the Fed’s preferred measure of inflation due.
In Europe, the Stoxx Europe 600 gained about 0.4%, recovering some of last week’s slide as retail and personal care sectors leading gains, while automobiles & parts as well as utilities shares are the biggest laggards. Prosus NV shares jumped as much as 5% as Tencent, in which it is a major shareholder, rallied after nailing down an earlier-than-anticipated debut of one of the year’s most eagerly-awaited mobile games. Among other individual movers, Galp Energia SGPS SA surged as much as 19% after the Portuguese oil company provided an update on a commercial oil find off the coast of Namibia. Sandoz Group AG climbed more than 4% to a record after the Swiss pharma company confirmed the European Commission’s approval of its Pyzchiva psoriasis drug. Here are the biggest movers Monday:
Earlier in the session, Asian stocks rose, with gains in Hong Kong on Beijing’s latest market support measures helping offset declines in tech hardware shares. The MSCI Asia Pacific Index climbed as much as 1.1%, with Tencent and Alibaba among the biggest boosts. Hong Kong’s benchmark Hang Seng Index jumped 1.8%, with notable gains also seen in Japan, Australia and South Korea. Chinese regulators announced five measures to optimize stock connects and bolster Hong Kong’s position as a financial hub. That helped improve sentiment along with the absence of further escalation in the conflict between Israel and Iran. Meanwhile, chip and AI shares declined after Nvidia’s biggest drop in four years drove US stocks lower Friday.
In FX, the Bloomberg Dollar Spot Index is flat while the antipodean currencies top the G-10 FX pile, rising 0.3% versus the greenback respectively. The Australian and New Zealand dollars climbed as fast-money funds continued short-covering that began in London on Friday, according to Asia-based FX traders. There could be temporary relief on the horizon from the recent volatility in currencies as there has already been “a considerable scaling back of Fed rate cut expectations,” according to Paul Mackel, global head of FX strategy at HSBC Holdings Plc. “It is hard to think Friday’s US PCE data will change this picture much,” he wrote in a note to clients.
In rates, Treasuries are slightly cheaper across the curve, following similar losses across European rates as demand for haven assets fades in the absence of major escalation in Middle East conflict. Meanwhile, investors are looking ahead to a heavy slate of Treasury and corporate new-issue supply this week. US long-end yields are higher by as much as 3.5bp on the day, with 2s10s and 5s30s spreads steeper by 2.4bp and 1.2bp as front-end outperforms; 10-year around 4.66% is 4bp cheaper on the day with bunds lagging by additional 1bp in the sector.
A hefty slate of Treasuries auctions will be a major test of whether yields have peaked for the year. Higher-than-expected interest rates amid persistent inflation are perceived as the biggest threat to financial stability among market participants and observers, the Fed said in its semiannual Financial Stability Report published Friday.
In commodities, Brent fell 0.6% to trade near $86.70 while spot gold falls 1.8% to around $2,342/oz. Treasuries dip as investors look ahead to a hefty slate of auctions. US 10-year yields rise 3bps to 4.65%. The Bloomberg Dollar Spot Index is flat while the antipodean currencies top the G-10 FX pile, rising 0.3% versus the greenback respectively. Bitcoin rises 2%.
Bitcoin climbs higher post-halving and now holds just above USD 66k; Ethereum also firmer and back at 3.2k.
Looking at today's calendar, US economic data slate includes March Chicago Fed national activity index at 8:30am; ahead this week are April preliminary PMIs, March new home sales and durable goods orders, first estimate of 1Q GDP, and March personal income and spending (with PCE deflator). Fed members have entered quiet period ahead of May 1 policy announcement.
Market Snapshot
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A more detailed look at global markets courtesy of Newsquawk
APAC stocks were mostly positive following the lack of any major geopolitical escalations over the weekend. ASX 200 was underpinned amid gains in nearly all sectors and with the advances initially led by outperformance mining stocks as copper prices approached closer to the USD 10,000/ton level and with firm gains in South32 following its quarterly output update.Nikkei 225 gained but is well off intraday highs after the index briefly wiped out all its earlier spoils before recovering again with price action choppy after last Friday's comments from BoJ Governor Ueda who suggested a hike is very likely if underlying inflation increases.Hang Seng and Shanghai Comp. were mixed in which the latter outperformed with strength in biopharma, tech and consumer stocks front-running the gains in the index. Conversely, the mainland lagged amid US-China frictions after the US House passed a bill that could lead to a total TikTok ban, while China's benchmark Loan Prime Rates were maintained at their current levels, as expected.
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European bourses are mixed, Stoxx 600 (+0.2%), having initially opened with a clear positive bias. In catalyst-thin trade, equities have ebbed lower, and off best levels, though generally hold a positive bias. European sectors are mostly positive; Retail is found at the top of the pile after Jefferies upgraded several Cos from within the sector. Autos are the clear underperformer, after Tesla (-3.2% pre-market) cut prices for some of its models, as such, European peers are suffering. US Equity Futures (ES +0.4%, NQ +0.5%, RTY +0.6%) are entirely in the green, with the NQ and ES attempting to pare back some of the hefty losses seen in the prior session. Elsewhere, UBS downgraded Apple (AAPL), Amazon (AMZN), Alphabet (GOOG), Meta (META), Microsoft (MSFT) and Nvidia (NVDA) to Neutral from Overweight
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Fixed Income
Commodities
Geopolitics: Middle East
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US Event Calendar
DB's Jim Reid concludes the overnight wrap
It's a bit of a messy picture for markets at the moment with huge uncertainty around events in the Middle East, US tech seeing its biggest sell-off for around 18 months, and with yields climbing as rate cuts gets increasingly pushed out. The lack of further escalations in tensions over the weekend in the Iran and Israel situation is helping Asia get off to a better start this morning though.
In terms of this week, we’ll have to wait for Friday for the main macro event namely the US core PCE print within the income and spending report. Our economists expect the core PCE deflator to come in at +0.30% vs. +0.26% last month. This would drop the YoY rate to 2.7% but within a whisker of rounding up to 2.8%, a level that both Chair Powell and Vice Chair Jefferson suggested that the Fed staff’s estimate had pencilled in.
In equity markets all eyes will be on earnings with a whopping 178 of the S&P 500 reporting including four of the Magnificent Seven namely Tesla (after Tuesday’s close), Microsoft, Alphabet (Thursday) and Meta (Wednesday). The final three are the 1st, 4th and 6th largest S&P 500 firms by market cap and make up nearly 14% of its market cap. Tesla is down -41% YTD and under a lot of pressure so it’s an important release for them. This all comes off the back of the worst week for the S&P 500 (-3.05%) since the US regional banking stress last March, and the worst week for the Nasdaq 100 (-5.36%) and the Magnificent Seven (-7.73%) since November 2022. A -3.47% decline on Friday marked a sixth day of consecutive losses for the Mag-7.
With three consecutive weeks of losses, the longest such streak since last September, the S&P 500 is now -5.5% from its recent peak. The VIX volatility index rose +1.4 points (and +0.7 points on Friday) to 18.71, to its highest weekly close since last October.
Nvidia (which doesn't report for another month) fell exactly -10% on Friday (-13.59% on the week), contributing around half of the -0.88% loss in the S&P 500 on Friday, and is now down -25% from its highs on 25 March. One catalyst appeared to be their hardware partner Super Micro Computer announcing its earnings date (April 30th) but without preliminary guidance as they have previously tended to do. They fell -23.1%. Everything else related to chips and AI also got stung with Advanced Micro Devices dropping -5.4%, and Arm Holdings -16.9% to 87.19 as examples. By contrast, the Dow Jones index was largely resilient last week, up +0.56% on Friday and flat (+0.01%) over the week. The Europe STOXX 600 also suffered in the risk-off environment but outperformed the tech heavy US market, falling -1.18% (and -0.08% on Friday).
Bonds did not benefit much from the risk-off tone, as markets became more sceptical about US rate cuts. Investors dialled back the number of rate cuts expected by year-end by +7.6bps to 39bps (+0.2bps on Friday). Off the back of this, 2yr Treasury yields jumped +8.8bps last week (unchanged on Friday). The story was similar for 10yr Treasury yields, which rose +9.9bps on the week to 4.62%, though they fell -1.2bps on Friday as markets sought haven assets. In Asia this morning they are back up +3.9bps to 4.66%. In Europe, 10yr bund yields were up +14.1bps on the week (+0.3bps on Friday), reaching the 2.50% level for the first time since November.
In commodities, oil prices initially surged following the news of a retaliatory Israeli missile strike against Iran on Friday, before unwinding most of the gains as details emerged suggesting no further imminent escalation. Brent crude fell -3.49% last week to $87.29/bbl (+0.21% on Friday), and WTI slipped -2.94% to $83.14/bbl (and +0.50% on Friday), also weighed down by stronger US crude inventories data earlier in the week. This morning in Asia, Brent futures are lower again, trading -0.62% as I type.
On the other hand, gold continued its ascent to another record high, rising +2.03% to $2392/oz (and +0.16% on Friday). It's losing a bit of safe haven demand this morning though (-0.9%). Ahead of its major halving event on Saturday, Bitcoin rose +0.72% to $64,034 on Friday after a volatile week. It is up at $64,800 this morning. For more detail on the halving, see here.
In Asia the Hang Seng (+1.67%) is outperforming following a regulatory boost as China’s market regulator pledged support to bolster Hong Kong’s status as a financial hub. Elsewhere, the S&P/ASX 200 (+0.87%), the KOSPI (+0.77%) and the Nikkei (+0.72%) are also edging higher. Meanwhile, Chinese stocks are bucking the trend (down around a quarter to a half percent), after the People’s Bank of China (PBoC) kept the loan prime rates steady. Outside of Asia, S&P 500 (+0.26%) and NASDAQ 100 (+0.36%) futures are trading higher.
Overnight, French central bank chief Francois Villeroy de Galhau stated in an interview that Middle East tension are unlikely to drive up energy prices and should not derail the ECB plans to start cutting interest rates in June.
Coming back to this week, the other main highlights by day are the global flash PMIs and US new home sales tomorrow, US durable goods and the German IFO (Wednesday), and US GDP and pending home sales (Thursday). Alongside the core US PCE print, Friday also sees the latest BoJ meeting and Tokyo CPI. Our Japan economist previews the BoJ here and expects no change in their monetary policy stance. However, he forecasts that the BoJ will remove its JGB purchasing guidelines from its statement or revise them to make its purchasing operations more flexible. He also sees the central bank raising its inflation forecast for FY24 amid the strong wage growth data already available as of the March meeting. Elsewhere, the Fed is now on its pre-FOMC media blackout but the ECB speakers will be in full force as you'll see in the week ahead calendar at the end, alongside all the main earnings and macro highlights. 112 Stoxx 600 companies will report this week alongside the 178 for the S&P 500 we mentioned above.