NY Open: Wall Street weakness - appetiser or entrée?
Wall Street opened with a pop today but debate still rages about whether the washout of the past few days was a mere blip or perhaps the start of something worse.
A busy week lies ahead with a slew of important macroeconomic data, and central bank meetings as well as the ongoing sagas of international trade tensions and sanctions, plus, of course, the corporate earnings season which this week will see Apple's much-anticipated release.
"It's a very busy week for the status of many things and especially the dollar, US yields, and a status check on the Federal Reserve as well," says John Hardy, Saxo's head for FX strategy. The yield on 10-year Treasuries jumped beyond 3% last week (a six-year high) and though it subsequently tipped back lower, it is expected to remain elevated this week, thereby facilitating additional dollar strength, he adds.
Elsewhere, GBP was crushed lower at the tail end of last week by a very weak UK Q1 GDP report and this week will likely extend to the downside with key areas for GBPUSD being 1.3700–1.3750 and then the 1.3600–1.3650.
Meanwhile, equities are in a somewhat confused state – the corporate earnings season is producing strong results but this has failed to lift sentiment, says Peter Garnry, Saxo's head of equity strategy. Investors are increasingly worried about interest rates and macro developments outside the US, he notes. "We remain strategically defensive," Garnry concludes.
But commodities, broadly put, are on a roll and April has show some decent advances, especially for oil which has been boosted by trade tensions and the threat of fresh sanctions in Iran, says Ole Hansen, Saxo's head of commodity strategy. Indeed oil now trades near a three-year high as Iranian and Venezuelan supply worries, along with strong demand, are offsetting a continued rise in the US rig count.