Apr 28, 2017 - Market Update

Short recap

Asia – saw some profit taking after risk on week

Europe opening lower

ECB no change in monetary policy

Draghi had a good showing, inflation not a worry, economy doing better

(5-yr forward inflation swaps above 1.6% indicating ECB still undershooting its inflation target)

Taper and rate hikes not a question of a foreseeable future

What may put additional pressure on EURUSD and close the Sunday’s gap up

New healthcare vote delayed again

Trump’s new trade war target is South Korea (kind of blindness in between the North Korea tensions…)

US and China say that North Korea situation can escalate if talks fail

Equities

Stocks too rich or too cheap?

Hard to say as the enormous QE stimulus is still here and rates are not at normal levels

S&P 500 trades at 18 times 2018 forward PE

S&P/TSX at 18 times 2018 PE

Deutsche Bank surprised but revenues are falling and trading is short of US peers performance

UBS benefited from trading and investment banking activities

Earnings season

Alphabet (mobile ads and YouTube), Amazon (well positioned), Intel, Microsoft, Ford doing very well

Exxon – market is looking at substantial rise in profits on cost cutting

Chevron – expecting company to by back to profit on refining and cost cutting

Others to report today: Colgate-Palmolive, General Motors, Goodyear, Imperial Oil (CA), Cameco (CA)

Bonds

Yields lower on risk off

Europe’s corps in high demand, credit spreads very low

May be the time to look elsewhere for better yield

10-yr Trys yield at 2.29%

10-yr Bund yield at 0.30% (pretty nice jump in Bunds after Draghi yesterday)

EURUSD

Looking whether closing the week below Sunday’s open at 1.0889 (Reuters)

Support at 1.0850; 1.0834 (200 DMA) and 1.0820 (50% Fibo)

Resistance at 1.0933 (61.8% Fibo) and around 1.0950 (upper channel line)

1999 high at 1.0915

Options expiries and US GDP to drive the market

Data

EZ: Flash CPI – 1.8% exp. vs 1.5% prior; Core 1.0% exp. vs 0.7% prior

US: Advance GDP – expecting slowdown with 1.2% exp. vs 2.1% prior, but it is not alarming as it is a historical pattern. Important to watch business investments but here, we can eventually blame lacking Trump policies that create hesitation about capital investments

US: Chicago PMI

US: Uni of Michigan Sentiment index – looking higher

Fed speakers: Brainard (1715 GMT) and Harker (1830 GMT)

Upcoming

Apr 29 – EU Summit to sign off the Brexit negotiations guidelines

May 7 – French presidential elections 2^nd round (Macron/Le Pen – 60/40)

May 25 – OPEC/Non-OPEC meeting

Jun 11/18 – French Legislative (Parliamentary) elections (a big question mark for Macron to gain majority)

Should you have any questions feel free to contact me anytime.

Good luck Champs!

Mr Hawk

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