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Too hot to handle?

Corporate Earnings News
Global market indices
Currencies
Cryptocurrencies
Fixed Income
Commodity sector news
Key data to move markets this week
Global macro updates

Corporate Earnings News

Corporate earning calendar 11 April - 19 April 2024

Friday: BlackRock, JP Morgan, State Street, Wells Fargo, Citigroup.
Monday: M&T Bank Corp, Goldman Sachs.
Tuesday: Bank of America, Johnson & Johnson, UnitedHealth Group, Northern Trust, Morgan Stanley, PNC Financial Services, Bank of New York Mellon, Omnicom, J. B. Hunt Transport Services, Telefonaktiebolaget LM Ericsson, Topdanmark.
Wednesday: U.S. Bancorp, Abbott Laboratories, Citizens Financial Group, Travelers, United Airlines Holdings, Prologis, CSX, Kinder Morgan, Crown Castle, Volvo, ASML Holding.
Thursday: Comerica, Discover Financial Services, D.R. Horton, Equifax, Elevance Health, Genuine Parts, Marsh & McLennan, KeyCorp, Snap-On, Netflix, Schindler Holding, Sartorius, Ipsos, Tele2.
Friday: Huntington Bancshares, PPG Industries, American Express, Procter & Gamble, Fifth Third Bancorp, Schlumberger, Regions Financial, Sodexo, Elisa Oyj.

US Stock Indices Price Performance

Nasdaq 100 -0.46% MTD +7.99% YTD
Dow Jones Industrial Average 
-3.38% MTD +2.05% YTD
NYSE -2.00% MTD +6.49% YTD
S&P 500 -1.78% MTD +8.19% YTD

Renewed inflation concerns triggered a broad stock market decline on Wednesday. The Dow Jones Industrial Average fell over 400 points, or 1.09%, with all but one sector in the S&P 500 experiencing losses. The real estate sector, particularly sensitive to interest rate fluctuations, bore the brunt of the selloff, dropping a significant 4.4%. This decline reflects investor anxieties over the Federal Reserve postponing any potential interest rate cuts due to rising inflation.

US stocks

Mega caps: A largely good week for the “magnificent seven” as expectations for rate cuts were pushed out further. Microsoft +1.29%, Alphabet +3.73%, Amazon +3.31%, Meta Platforms +1.74%, Nvidia +1.32%, and Tesla +0.38%, while Apple is -0.62%.

Alphabet’s Google contemplates a shakeup: premium search features powered by AI. This potential first for core search monetization comes as the company grapples with ChatGPT's challenge. Launched in late 2022, ChatGPT's comprehensive answers threaten traditional search models relying on link lists and ads.

Discussions reportedly centre on integrating AI search into existing subscriptions like Google One, which offers premium tiers with benefits like expanded cloud storage and access to the advanced Gemini AI assistant. Details on pricing and launch remain unclear, but some features might eventually migrate to the free search engine.

A key challenge is balancing innovation with revenue. Search ads generated a massive $175 billion in 2023, over half of Google's income. Concerns exist that AI-powered, comprehensive answers could decrease ad clicks. Online publishers who rely on Google traffic also fear a decline in user visits if AI tools directly present website information.

Despite these concerns, Google has already dipped its toes into premium AI. This year, a premium tier within Google One offered access to the advanced Gemini chatbot, and Gemini was integrated into Workspace applications.

Energy stocks had an overall good week this week as the energy sector itself was generally up. Occidental Petroleum +1.94%, Shell +3.80%, ConocoPhillips +0.81%, Chevron +1.23%, Baker Hughes +0.68%, Halliburton +1.13%, and ExxonMobil +2.07%. Apa Corp (US) -1.07%, Phillips 66 -3.23%, and Marathon Petroleum -2.33%.

In his first public interview since stepping down as CEO of Shell at the end of 2022, Ben van Beurden expressed concern about the widening valuation gap between Shell's London listing and its US counterparts. Speaking to the Financial Times, he argued that Shell was "massively undervalued" in London. Van Beurden highlighted the benefits enjoyed by US-listed oil companies, including access to a deeper pool of capital and higher valuations. While some might dismiss his comments as simply reflecting broader UK market concerns, a prior analysis by DD (October 2023) underlines a more pressing issue. The report points out that Shell's US rivals are strategically leveraging their higher stock valuations to fuel acquisitions and gain a competitive edge in the global energy sector. In response to the valuation gap, some analysts have proposed industry consolidation as a potential solution. Speculation has recently focused on a potential mega-deal between Shell and BP, two major players facing similar challenges. However, such a move could have significant ramifications. As London's most valuable listed company, Shell's potential departure from the UK market would likely raise concerns and trigger alarm bells for British policymakers.

Materials and Mining stocks had a mixed week. Aluminium and copper prices rose this week, 1.44% and 2.12%, respectively. Nucor -0.46%, Mosaic -0.31%, CF Industries -6.14%, and Yara International -5.99%, while Sibanye Stillwater +6.14%, Freeport-McMoRan +3.45%, Newmont Mining +3.55%, and Albemarle +5.39%.

Mosaic has scheduled its Q2 earnings call for 2nd May.
Yara International has scheduled its Q2 earnings call for 26th April.
Albemarle has scheduled its Q2 earnings call for 2nd May.

European Stock Indices Price Performance

Stoxx 600 -1.19% MTD +5.76% YTD
DAX -2.14% MTD +8.03% YTD
CAC 40 -1.96% MTD +6.66% YTD
IBEX 35 -2.71% MTD +6.66% YTD
FTSE MIB -2.05% MTD +12.15% YTD
FTSE 100 +0.11% MTD +2.95% YTD

The pan-European Stoxx 600 index closed the week ending 10th April, nearly flat, hovering slightly above the breakeven point. This capped a volatile week marked by initial optimism and a later correction due to renewed inflation concerns.

The week began with a positive outlook, with the Stoxx 600 closing 0.2% higher on 3rd April. This uptick was driven by gains in the tech sector, with chip giant ASML leading the charge after a positive monthly revenue report from competitor TSMC. Financial stocks also saw modest gains, with UniCredit and Intesa Sanpaolo rising on investor confidence.

The positive momentum was disrupted on Wednesday by a hotter-than-expected US CPI report. This reignited inflation fears and led to a broad market selloff on 5th April. The Stoxx 600 fell slightly, with consumer cyclical stocks, particularly those sensitive to interest rates, experiencing the steepest declines. Sectors like luxury goods (e.g., Kering, LVMH) felt the pressure due to potential dampening of consumer spending.

Technology (+1.36%) remained the best-performing sector throughout the week, fueled by positive sentiment surrounding chipmakers and the broader tech industry. Financial stocks (+1.07%) also saw modest gains, with some banks like UniCredit and Intesa Sanpaolo continuing their upward momentum. Consumer cyclical (-1.89%) sectors, particularly luxury goods and retail, were the biggest losers due to inflation concerns. Energy (+0.87%) and utilities (+0.42%) displayed relative resilience, potentially seen as the main beneficiary of rising energy prices in a volatile market.

Other Global Stock Indices Price Performance

MSCI World Index -1.66% MTD +6.64% YTD
Hang Seng +2.54% MTD -0.50% YTD

The MSCI World Index closed the week down approximately -1.5%. The Hang Seng Index mirrored the global trend, closing the week down roughly -2.2%. Both the MSCI World and Hang Seng Indexes saw technology stocks suffer the most significant declines. Rising interest rates and concerns about future growth prospects dampened investor enthusiasm. Financial stocks experienced losses in both indices, but to a lesser extent compared to technology. Uncertainty around future interest rate hikes contributed to this cautious outlook. Consumer discretionary sectors in both indices saw notable declines. Sectors like utilities and consumer staples displayed some relative resilience in both indices.

Currencies

EUR -0.41% MTD -2.66% YTD to 1.0743
GBP 
-0.63% MTD -1.48% YTD to 1.2540

The dollar surged ahead this week following yesterday’s release of higher than expected inflation data. The euro fell over 1%, its biggest one-day fall in about a year, on the news.

The dollar strengthened to its highest level against the yen, reaching above 153 yen to the dollar for the first time since mid-1990. This could represent a “line in the sand” and result in direct intervention by the Bank of Japan.

Currency market slumber awaits global policy shifts and US elections. The world's currency markets are experiencing their deepest lull in nearly four years. Measures of historical and expected volatility, which gauge price fluctuations over time, have sunk dramatically. This muted environment stems from central banks holding steady on interest rates. Deutsche Bank's volatility gauge, a widely-followed indicator, currently sits near its lowest point in two years, approaching pre-pandemic levels.

However, signs of change are emerging. The Swiss National Bank became the first major central bank to reduce borrowing costs in March, and the ECB and BoE are all anticipated to follow suit later in 2024.

While recent stronger-than-expected data has prompted some investors to scale back bets on the Fed cutting rates, leading to a rise in US yields, eurozone bond yields have largely mirrored the trend. A return to significant volatility hinges on increased divergence among central bank policies, and this increasingly likely in the second half of the year given the emerging divergence in the inflation paths in Europe and the US.

The potential return of Donald Trump to the White House also casts a long shadow. His previous pronouncements regarding a 10% universal import tariff and potential levies exceeding 60% on Chinese goods raise concerns of market disruption. Options trading suggests heightened anticipation of volatility in the Mexican peso, Polish zloty, and the yuan – currencies that all experienced significant declines following Trump's 2016 victory. Volatility in the 9-month to one-year range for those three currencies is really high.

The current low volatility environment restricts profitable trading opportunities. However, there are glimpses of rate moves generating pockets of volatility. The Bank of Japan's recent rate hike, the first in 17 years, triggered a sharp depreciation of the yen as investors came to terms with the prospect of persistently low Japanese borrowing costs. This move also caused fluctuations in Asian currencies, including the Chinese yuan, demonstrating how ripples can spread across the market. Direct intervention by Japanese authorities to support their currency could also introduce another element of volatility.

While low volatility presents challenges, it also makes carry trade strategies (borrowing in low-interest-rate currencies to invest in higher-yielding ones) more attractive and reduces the cost of hedging equity or bond portfolios.

Cryptocurrencies

Bitcoin +0.12% MTD +68.62% YTD to $69,997.81
Ethereum 
-0.39% MTD +54.59% YTD to $3,521.72

Bitcoin ended the week 6.85% higher, while Ethereum rose 7.45%. It managed to recover following the hotter-than-expected US inflation number on Wednesday to rise back over the $70K mark with indications that the crypto market is now expecting two interest rate cuts by the Fed this year. As noted by Coindesk.com, GBTC outflows seem to be slowing this week, which may have a more positive impact on Bitcoin in the weeks ahead. 

Fixed Income

US 10-year yield +35 basis points MTD +67 basis points YTD to 4.55%
German 10-year yield +35 basis points MTD +44 basis points YTD to 2.45%.
UK 10-year yield +19 basis points MTD +60 basis points YTD to 4.13%.

US Treasury yields surged on Wednesday after inflation data exceeded expectations, pushing the benchmark 10-year yield to its highest level since November 2023. The unexpected rise in consumer prices, particularly gasoline and shelter costs, casts significant doubt on the Fed's previously projected June rate cut.

Market sentiment shifted dramatically. By Wednesday evening, traders were anticipating a first rate cut only in September, with a total of fewer than two cuts anticipated for 2024 – a significant revision down from the three cuts projected by Fed policymakers in March.

Eurozone bond yields also rose in response to the stronger-than-expected US inflation data. Investors rapidly adjusted their expectations for Fed rate cuts, leading to a rise in the eurozone's benchmark yield by 6 basis points to 2.432%. However, the surge in US yields outpaces the eurozone, reflecting the relative strength of the American economy. This trend continued on Wednesday, with the widening gap between the 10-year Treasury and German rates reaching its highest point since late 2019 (214 basis points).

While the European Central Bank is widely expected to maintain interest rates at its upcoming meeting on Thursday, market focus remains on any hints regarding the pace of future rate hikes following their anticipated initial increase in June. According to Bloomberg news, money markets are now pricing in 79 basis points of monetary easing from the ECB this year, compared to 86 basis points on Tuesday and significantly lower than the 95 basis points projected at the end of March. The chance of a first quarter-point move in June fell to about 80% after being fully priced last week.

Italian bond yields, a benchmark for the eurozone periphery, also experienced a rise of 7 basis points, reaching 3.784%. Notably, the spread between Italian and German 10-year yields remained relatively unchanged at 134 basis points. This spread had reached a high of 144.5 basis points earlier in April, but has since stabilised, reflecting a cautious market outlook.

Commodities

Gold futures +5.06% MTD +12.96% YTD to $2,329.60 per ounce.
Silver futures +12.92% MTD +16.81% YTD to $28.14 per ounce.
West Texas Intermediate crude +1.54% MTD +18.58% YTD to $85.25 a barrel.
Brent crude +4.34% MTD +17.83% YTD to $90.78 a barrel.

Gold prices were up this week reaching three consecutive all-time highs. Continuing central bank buying, safe-haven inflows due to continued and rising geopolitical risks, and demand from momentum-following funds have resulted in gold gaining 14% so far this year.

Fueled by a rise of over a dollar per barrel the previous day, oil prices continued their upward trend on Wednesday. Investor concerns focused on a potential escalation of the Middle East crisis, particularly involving Iran, a major oil producer within OPEC. Brent crude futures climbed 30 cents, reaching $90.78 a barrel, reflecting a 0.3% increase. Similarly, US West Texas Intermediate crude futures rose 25 cents (0.3%) to $86.46 a barrel.

This upward momentum followed a significant gain exceeding 1% on Tuesday. The catalyst was the death of three sons of a Hamas leader in an Israeli airstrike, fueling anxieties about a potential stalemate in ceasefire talks between the two sides. While negotiations commenced earlier in the week after a six-month-long conflict, no agreement has yet been reached.

Geopolitical developments in the Middle East remain highly influential on oil prices. Market participants are actively factoring in the risk of supply disruptions if tensions were to persist. Looking ahead, oil traders will be closely monitoring the release of the monthly oil market reports – one from OPEC later on Thursday and another from the International Energy Agency on Friday.

Note: As of 4 pm EST 10 April 2024

Key data to move markets this week

EUROPE

Thursday: ECB Monetary Policy meeting and ECB’s Press Conference.
Friday:
Eurozone Ecofin meeting, German CPI, German Harmonized Index of Consumer Prices, and a speech by ECB’s Board Member Frank Elderson.
Monday:
Eurozone Industrial Production.
Tuesday: 
Eurozone Trade Balance, and German ZEW Economic Sentiment and Current Situation surveys.
Wednesday:
Eurozone CPI, CPI Core, and Harmonized Index of Consumer Prices.

UK

Thursday: Speech by BoE’s MPC member Megan Greene.
Friday:
GDP, Industrial Production, Manufacturing Production, and Construction Output.
Monday:
A speech by BoE’s Deputy Governor Sarah Breeden.
Tuesday: 
Employment Change, Unemployment Rate, Claimant Count Change, Average Weekly Earnings and speech by BoE Governor Andrew Bailey.
Wednesday:
CPI Core, CPI EU Harmonized, PPI, and Retail Price Index. Speeches by BoE Governor Andrew Bailey and BoE’s MPC Member Jonathan Haskel.

US

Thursday: Initial Jobless Claims, and Continuing Jobless Claims, PPI, and PPI Core. Speeches by New York Fed President John Williams and Atlanta Fed President Raphael Bostic.
Friday:
Michigan Consumer Sentiment Index. Speeches by Atlanta Fed President Raphael Bostic and San Francisco Fed President Mary Daly.
Monday:
Empire State Index, Retail Sales, and NAHB Housing Market Index. Speech by Dallas Fed President Lorie Logan.
Tuesday:
Industrial Production, Manufacturing Production, Capacity Utilisation, Building Permits, and Housing Starts. Speech by San Francisco Fed President Mary Daly.
Wednesday:
Fed Beige Book. Speech by Cleveland Fed President Loretta Mester.
Thursday:
Initial and Continuing Jobless Claims, Philadelphia Fed Index, Existing Home Sales, and Leading Indicators. Speeches by New York Fed President John Williams and Atlanta Fed President Raphael Bostic.

GLOBAL 

Wednesday: IMF and World Bank Spring Meeting. 
Thursday:
IMF and World Bank Spring Meeting.

Global Macro Updates

Persistent inflation disrupts Fed’s soft-landing path. Inflation pressures remained stubbornly high in March, jeopardising the Fed's plan to begin reducing interest rates in June. The Consumer Price Index (CPI) rose 3.5% year-over-year in March, exceeding economists' expectations and exceeding February's 3.2% increase. Core inflation, a measure excluding volatile food and energy prices, also remained unchanged at 3.8% year-over-year.

Financial markets reacted swiftly to this third consecutive instance of inflation exceeding forecasts. Previously anticipating a June rate cut, traders are now firmly focused on the Fed's mid-September meeting for the first potential reduction. Minutes released from the Fed's March meeting corroborated this shift, revealing policymakers' disappointment with inflation data even before the latest report.

Prior to March, the Fed had expressed optimism about achieving a soft landing. This scenario involved pre-emptive rate cuts before the economy weakened significantly. The FOMC members expressed diverging views on the pace of rate cuts in March. The Fed's dot plot revealed that ten officials projected at least three quarter-point cuts this year, while nine anticipated two or fewer. However, the latest data removes the justification for such cuts and could lead the Fed to maintain rates at their current 23-year high until a clearer economic slowdown emerges.

The core index, excluding goods like cars and trucks, still climbed 0.4% despite price declines in those categories. Services outside of housing, a category encompassing car insurance and medical care, were a particular area of concern due to their tight connection to labour market strength and potential for price stickiness. The cost of shelter also defied expectations by rising 0.4% from February, contradicting private-sector indicators suggesting a slowdown in rent increases.

Traders are now anticipating a first rate cut of 0.25% at the Fed's September meeting, bringing the target range to 5%-5.25%. They foresee only one additional cut by year's end. The possibility of no rate cuts this year, previously negligible, has jumped to 14% following the inflation surprise. While this remains an unlikely scenario, it is increasingly being discussed by economists and some Fed officials themselves.

While inflation has undoubtedly eased since its peak of nearly 9% in mid-2022, the ‘last mile’ of disinflation appears to be proving challenging. The latest data halted the streak of declining core CPI figures observed since March 2023. The key concern is not a resurgence of inflation, but rather its potential to stall out and deviate from the projected path back to the Fed's 2% target.

While every effort has been made to verify the accuracy of this information, EXT Ltd. (hereafter known as “EXANTE”) cannot accept any responsibility or liability for reliance by any person on this publication or any of the information, opinions, or conclusions contained in this publication. The findings and views expressed in this publication do not necessarily reflect the views of EXANTE. Any action taken upon the information contained in this publication is strictly at your own risk. EXANTE will not be liable for any loss or damage in connection with this publication.

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