- Corporate earnings results prop up equities
- Dollar hits 20-year high versus Japanese yen
- Gold recovers
Key Events
Better than expected earnings helped propel US futures on the Dow Jones, S&P 500, NASDAQ and Russell 2000 as well as European shares higher on Thursday. Clearly, traders believe better than expected results indicate the global economy can withstand recent pressures including inflation, the war in Ukraine and a resurgence of coronavirus in China.
Markets are now keenly awaiting results today from mega cap tech giants Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN) after the US close.
Oil moved higher as European countries search for alternative energy sources to Russian natural gas.
Global Financial Affairs
All four US contracts were well in the green this morning, with NASDAQ futures racing ahead, almost up 2.5%. Growth stocks were back in the lead as traders have renewed optimism on continued economic growth dispelling recession fears.
Futures on the tech-heavy index were driven higher by Meta Platforms (NASDAQ:FB) which jumped 18% in pre-market trading after the social network announced results Wednesday after the close. Among other things, the release showed user growth was slightly higher than estimated.
European stocks also rallied on Thursday, with the STOXX 600 Index over 1% higher as all industry groups rose. TotalEnergies (EPA:TTEF), Glencore (LON:GLEN) and Capgemini (EPA:CAPP) outperformed, pushed up by positive earnings.
The French energy major TTEF announced first-quarter profits grew on surging energy prices but registered a $4.1 billion impairment expense for a liquefied natural gas operation in the Russian Arctic. TotalEnergies posted a $4.94 billion quarterly net profit, up from last year's corresponding quarter's $3.34. The company also announced the first interim dividend for the year of 0.60 euro per share, a 5% increase from last year.
The stock completed a small H&S Continuation Pattern between the Mar. 7 low and Apr. 22. The pattern ended with a downside breakout of a 200 DMA-reinforced neckline. At the same time, the price may have also completed a much larger, upsloping H&S top. Cautious traders may wait to see whether the pattern may still be forming into a Symmetrical H&S top, with the neckline at the $45.70 area, the December low. Note, however, that the ROC provided a negative divergence to the price, suggesting that perhaps the upsloping neckline is the correct interpretation.
Capgemini recorded a 17.7% increase in profits to 5.17 billion euros at constant exchange rates.
The price fell below the 200 DMA after the 50 DMA did so last month, triggering a Death Cross. Like TotalEnergies, the price may be forming a small H&S pattern, which could be part of the right shoulder of a much larger structure.
Earlier today, Asian shares were all green. Japan's Nikkei 225 jumped 1.75%, leading a rally, as the BoJ kept rates at 0%, extending an ultraloose monetary policy. The yen weakened against the dollar, pushing the USD/JPY to its highest level since March 2002.
The yen completed a falling flag, bullish after a 13-day winning streak, the longest winning streak for the dollar, or the longest losing streak for the yen on record. We predict the USD/JPY will aim at the 135.00 level, retesting the 2001 peak. Not only is that the flag's implied target, but the pair completed a bottom since 1988. We may be witnessing market moves in historic proportions.
Hong Kong's Hang Seng rose 1.65%, extending a rally to the second day for the first time in two weeks and the Shanghai Composite also rose 0.6%. Both indices probably benefited from recent comments from China that it would support economic growth.
US stocks on the S&P 500 found their footing yesterday, although they gave up the majority of a rebound, following the worst selloff since early March, testing February lows.
A lower price would establish a long-term downtrend. The momentum-based Rate of Change has been providing a continuous negative divergence to the rising cost, increasing the chances of an official trend reversal.
The NASDAQ 100 closed marginally lower but is down 2.5% for the week, the fourth straight week of losses totaling 12.5%
Unfortunately, the tech heavy-benchmark registered a second lower trough, establishing a long-term peak-trough downtrend. Conservative technicians would insist on another peak and trough to have a descending series independent of the final height of the uptrend.
The price also fell for the second week below the 100-week MA as the index fell to a 13-month low. Therefore, we think that the rally in Meta Platforms is too late to turn this heavy ship around.
The NASDAQ 100 and the Russell 2000 are already in bear market territory.
Treasury yields on the 10-year slipped and the dollar extended its advance to its sixth straight day and to a 20-year high.
Gold rebounded slightly from losses.
The yellow metal forms in an intraday bullish hammer, hammering out support on the Nov. 16 peak and the 100 DMA. However, the price seems to have broken the downside of a triangle, suggesting bears may be taking control of the trend. It's a wonder that the non-yielding asset has maintained these levels considering the greenback is the strongest in two decades. These are dangerous times in the market when textbook theories go out the window as traders attempt to write future rules.
Bitcoin rose for the second day, taking on a recently completed bearish flag as the price bounced off the bottom of a rising channel.
We have been waiting for the rising channel to the break to the downside, as its top tests the neckline of a large H&S top, reinforced by the 200 DMA, which has been falling.
Oil rose for the third day amid the ongoing high-stakes poker match between Russia and the rest of Europe.
President Vladimir Putin has halted the natural gas supply to countries that will not pay in Russian rubles.
Up Ahead
- On Friday, the Eurozone releases CPI figures.
- The US PCE index is published on Friday.
- Canada publishes GDP figures for February.
Market Moves
Stocks
- The MSCI Asia Pacific Index fell 1.8%
- The MSCI Emerging Markets Index fell 0.5%
Currencies
- The Japanese yen fell 1.6% to 130.53 per dollar
- The offshore yuan fell 0.7% to 6.6346 per dollar
Bonds
- Germany's 10-year yield declined to 0.81%
Commodities
- Brent crude rose 0.2% to $104.17 a barrel
- Spot gold rose 0.2% to $1,890.09 an ounce