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Risk sentiment positive ahead of US retail sales

Fawad Razaqzada Fawad Razaqzada 15/04/2021
Risk sentiment positive ahead of US retail sales Risk sentiment positive ahead of US retail sales
Risk sentiment positive ahead of US retail sales Fawad Razaqzada
Sentiment towards risk remained positive ahead of the release of more Wall Street bank earnings and key US data, with retail sales and jobless claims coming up shortly. European stocks continued to push higher this morning with the UK’s FTSE breaking out to a new high for the year. The DAX was also near its recent highs despite news German COVID-19 cases have jumped by most since early January. In FX, commodity dollars were leading the gains against the US dollar as yields dipped.

Sentiment remains supported because of optimism over the re-opening of major economies as Europe's vaccination programme got a boost after Pfizer and BioNTech planned to increase deliveries in the coming weeks. The European Union aims to vaccinate 70% of adults by the summer, which should boost the travel sector. In the US, the delay to Johnson & Johnson's vaccine is not expected to slow the progress too much there.

Retail sales and jobless claims up next

The dollar recovered from earlier weakness ahead of the retail sales data, due at 13:30 BST. Headline sales are seen rising 5.8% month-over-month with core sale expected to come in at 5.1%.  

We have had plenty of positive news from the world’s largest economy in recent times, both from a macro point of view as well as company news. Yet, neither the dollar nor bond yields have reacted in the way you would have expected, with both falling (see chart of 10y yields below). This is a reflection of growing risk appetite, with investors convinced that a bit of improvement in data is not going to change the outlook for interest rates much.  So, it is possible that if today’s retail sales beat expectations that we might get a knee-jerk reaction higher in the dollar, before it resumes lower in favour of the more risk-sensitive currencies.  The dollar will probably make a more meaningful comeback when there is a lot more evidence of the US economy running hot to raise concerns about inflation. Right now, the markets believe that is not the case.
 
More bank earnings
 
The focus will remain on bank earnings after the Wall Street giants kicked off the reporting season in style yesterday as Goldman Sachs crushed it with triple-digit revenue growth. Bank of America and Citigroup will report earnings ahead of the bell. We have already heard from the likes of Blackrock and US Bancorp, which reported above forecast revenue and earnings. PepsiCo also beat on both top and bottom lines, as too did UnitedHealth.

So far it has been another solid day for quarterly earnings. But with so much optimism having already been priced in with the major indices in the US hitting repeated all-time highs, the market will now want to see if the optimism is justified. The key question going into the earnings season is this: Will company CEOs mirror investors’ optimism on economic outlook, or will they provide more subdued forecasts? Until now, investors have been quite happy to be buying any dips in equity markets amid growth optimism and despite rising inflationary pressures and valuation concerns.
 
Crude oil steady after upsurge
 
Oil prices jumped nearly 4% yesterday to reach their best levels in a month. Sentiment was boosted by fresh signs of a tightening market as shrinking crude stockpiles in the US added to optimism over stronger demand globally. Keep a close eye on prices as WTI tries to break resistance in the $63.15-$63.60 range and Brent tests its own key resistance around $66.80. If these levels give way then expect further technical buying in the days ahead.
 
Coinbase volatile debut

Investors will also be keeping a close eye on Bitcoin and other digital currencies after the largest US cryptocurrency exchange, Coinbase, went public yesterday. COIN’s debut saw its shares open well above the reference price of $250, at $381. The stocks quickly flew to an intraday high of $429.54 before dropping to $310 and eventually settling at $328, giving it has a market cap of $74 billion at the close. It will likely remain volatile for a few days more, providing lots of trading opportunities.
 
Bitcoin has fallen from its record highs but at the time of writing it was holding its own well above the key short-term support in the $60,000-$61200 range. Meanwhile, Ethereum has climbed to a new record high. The path of least resistance remains to the upside for cryptos, for now.

 
Coming up:
 
  • US retail sales, unemployment claims, industrial production and a few other second tier data
  • Earnings: Bank of America andCitigroup
Friday
  • Chinese GDP, industrial production and retail sales,
  • US building permits, housing starts, and UoM Inflation Expectations and Consumer Sentiment
  • Earnings: Morgan Stanley, Bank of New York Mellon Corp and Honeywell International


yields

Source: ThinkMarkets and TradingView.com
Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.

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Fawad Razaqzada
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Fawad Razaqzada
Market Analyst, London

Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms. He leverages years of market knowledge to provide retail and professional traders worldwide with succinct fundamental & technical analysis. Fawad also offers trading education to help shorten the learning curves of developing traders.
 
His colleagues consider him an expert at reading price action on the charts. This together with his deep understanding of economics and fundamental analysis, and trading experience, puts him in a great position to forecast short term price movements. Fawad covers a wide range of markets, including FX, commodities, stock indices and cryptocurrencies and his comments are regularly quoted by the leading financial publications such as Reuters and Market Watch. In addition to ThinkMarkets, Fawad also provides analysis and premium trade signals on his own website at TradingCandles.com.
 
 

Carl Capolingua
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Carl Capolingua
Market Analyst, Melbourne

Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions. Specialising in Australian and US stock markets in particular, Carl uses a top-down approach to assess the global macro picture before using both technical and fundamental techniques to select stocks. He regularly appears as an expert commentator on a number of media outlets throughout the Asia-Pacific region.
 
 
 

Kearabilwe
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Kearabilwe Nonyana
Market Analyst, South Africa

Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives. His career in the financial markets has seen him hold various positions in global investment banks and global CFD and Spread betting firms. He has deep interest in using quantitative methods to help him understand and teach the fundamental drivers of asset prices.
 
 
 

Fawad Razaqzada
Fawad Razaqzada
Fawad is an experienced analyst and economist having been involved in the financial markets since 2010, producing market commentary and research for a number of global FX, CFD and Spread Betting brokerage firms.
Carl Capolingua
Carl Capolingua
Carl has over 20 years' experience in financial markets and has held senior analyst roles at a number of financial institutions.
Kearabilwe
Kearabilwe Nonyana
Kearabilwe is an experienced Sales trader and Analyst specialising in Equity and Equity derivatives.

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Any opinions, news, research, analyses, prices or other information contained on this website is provided as general market commentary and does not constitute investment advice. ThinkMarkets will not accept liability for any loss or damage including, without limitation, to any loss of profit which may arise directly or indirectly from use of or reliance on such information.
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