Market drivers and catalysts
Equities: US equities resurgent overnight on strong earnings reports and commitment to AI spending from Microsoft and Meta Platforms.
Currencies: USD powers higher on strong risk sentiment for US stock as two of Mag7 posted strong earnings after the close yesterday.
Fixed Income: US yields dipped yesterday, only rebounded slightly on widespread risk sentiment rebound
Commodities: Gold’s correction extends further; Supply glut risk weighing on crude prices
Macro events: US Weekly Initial Jobless Claims and US April ISM Manufacturing
Macro data and headlines
Meta and Microsoft earnings reports after the close yesterday buoyed sentiment in the US equity market, even after a strong comeback from an intraday sell-off earlier in the day. More below.
- The US and Ukraine have reached a deal granting the US privileged access to new investment projects to develop Ukraine's natural resources, including aluminum, graphite, oil, and natural gas. US Treasury Secretary Bessent said, the deal signals the Trump administration's commitment to a peace process centered on a free, sovereign, and prosperous Ukraine.
US President Trump acknowledged that his tariff program had a perception problem and posed a significant political risk, but he remained determined to push on, while saying he had "potential deals" with South Korea, Japan, and India, but was "in less of a hurry" than those expressing anxiety over the economy.
- Key US data ahead through Friday after the US dollar largely ignored the weak US Q1 GDP estimate (driven in part by huge tariff-frontrunning trade deficits) and a weak April ADP employment change (+62 vs. +115k expected) number yesterday.
Today sees a likely weak US April ISM Manufacturing number (47.9 expected after 49.0 in March, but several of the weekly manufacturing surveys have been weak for April, including yesterday’s April Chicago PMI, which came in at 44.6 vs. 45.9 expected and 47.6 in March). Tomorrow’s main event is the April US jobs report, as Nonfarm payrolls growth is expected to dip to +135k, while the unemployment rate is expected to remain at the post-pandemic cycle high of 4.2%.
The Bank of Japan kept its policy rate unchanged at 0.5% and halved its economic growth outlook to 0.5% for this fiscal year while pushing back the timing for reaching its inflation target after the global trade war had darkened the economic outlook.
Macro calendar highlights (times in GMT)
0830 – UK April Manufacturing PMI
1230 – US Weekly Initial Jobless Claims
1330 – Canada April S&P Global Manufacturing PMI
1345 – US April (final) S&P Global Manufacturing PMI
1430 – EIA Natural Gas Storage Change
1400 – US April ISM Manufacturing
Earnings events
Today: Apple, Amazon.com, Eli Lilly, Mastercard, McDonald’s, MicroStrategy, Airbnb, …
Friday: Exxon Mobil, Chevron, Eaton, …
For all macro, earnings, and dividend events check Saxo’s calendar.
Equities
US stock index futures rebounded strongly ahead of the close and then extended gains late yesterday as Microsoft and Meta both soared post market on strong earnings reports and forecasts that contrasted with the cautious guidance elsewhere.
Microsoft shares rose some 6% after it reported earnings yesterday after the market close. The company projected low operating expense growth and a stronger than expected revenue growth for the quarter ahead. As well, the company remained committed to its USD 80 billion in capital expenditures this calendar year as it is seeing so much demand for AI that it expects capacity challenges as soon as June.
Meta also rose in the after market after it reported a quarterly revenue beat and its quarterly profit rose 35% from last year, in part due to growth in the number of add impressions of 5%, while its prices rose 10%. Like Microsoft, Meta platforms remains committed to massive AI data center spending, even raising its forecast for spending this year to USD 64-72 billion from the previously announced range of USD 60-65 billion.
Nvidia shares were up some 4% in the post market after Microsoft’s and Meta’s AI spending announcements in their earnings calls.
Tesla’s board is said to be in search of a new CEO to replace Elon Musk, according to a Wall Street Journal article released yesterday. The article cited sources who said that the company’s board had reached out to several executive search firms. Neither Tesla nor Elon Musk have responded to the article’s contents.
Qualcomm fell on a tepid revenue forecast. Apple and Amazon report post market today
Fixed Income
The US Treasury yield curve steepened yesterday as short yields dipped further to new local lows while 10-year yields fell less. The entire yield curve lifted slightly late yesterday on resurgent risk sentiment late yesterday in the US, with the 2-year treasury benchmark this morning at 3.62% and the 10-year benchmark at 4.18%.
US high yield credit spreads widened sharply yesterday, with the Bloomberg High Yield spread index to US treasuries we track closing up 14 basis points to 384 basis points.
Japan government bond yields fell in the wake of the Bank of Japan overnight as the bank pushed back the timing for reaching its 2% inflation goal by a year to include fiscal 2027. The 2-year JGB benchmark yield dropped 4 basis points to 63.5 basis points.
Commodities
Gold trades lower for a third day as the correction goes deeper in response to potential trade-talk progress, improved risk appetite following US tech earnings beat, and not least a lack of buying from China, which is observing a Labour Day holiday with markets closed until 6 May. The next major level to watch is USD 3,165, Fibo and 3 April high.
Crude oil’s April slump continued right until the end with Brent falling to USD 61, while WTI trades near USD 58—a level, if sustained, that will likely lead to lower US production in the coming months. Prices are being weighed down by economic growth worries in China and the US, as well as a Saudi-led production increase from key OPEC+ members.
Currencies
The US dollar rebounded strongly amidst the enthusiasm in the US equity market and on a relatively dovish Bank of Japan meeting overnight as USD longs were further trimmed. USDJPY squeezed back higher and rose above the recent highs near 144.00 by late Asian hour, with the 145.00 area the next resistance, followed by 146.50.
EURUSD tested below 1.1308 support overnight, hitting its lowest levels just below 1.1300 since mid-April, while AUDUSD traded sideways as the AUD enjoyed stronger global risk sentiment.
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