Stocks – End mixed as traders brace for peak earnings season
CAD – Loonie follows oil’s lead
GBP – Parliaments return to see fresh leadership challenges for May
Oil – Ending of Iranian sanction waiver drives oil to 6-month highs
Gold – Risks remain to the downside
Bitcoin – Approaches key resistance at $5,500
Asian equities are not likely to get a big queue from US stocks today. Monday trade was the calm before an earnings storm that will see many big names, such as Microsoft, Amazon, and Facebook report their first quarter results.
The Dow finished lower, while the Nasdaq pulled out a small gain. Investors have not had any clear signs from economic data thus far as to will we see better results following the slow start to the year.
The Canadian dollar rallied against of its major trading partners, benefiting from the strong surge oil prices had from the US decision to end waivers for countries to import Iranian crude. The White House decision is expected to put a squeeze on global crude supplies in the short-term.
Typically, emerging market currencies have a high correlation with oil prices. The Russian ruble, Colombian peso and Brazilian real have benefited from higher prices, while the Philippine peso, Turkish lira and Indian rupee have not.
Recess is almost over, and PM May is returning to an unprecedented no-confidence challenge from Conservative grassroots campaigners. The end is near regardless for the PM, either she gets a deal done before European Parliament elections which are due on May 23rd or we see a long extension support starting over with new leadership.
The British pound is lower for a fifth consecutive day to the dollar and is approaching major support at 1.2950. Brexit has been postponed twice and if we see May fail again, we may not see them leave the EU until the end of October. The longer the delay for Brexit, the further we could see sterling drift lower.
Crude prices rose to 6-month highs following the US ending of waivers on Iranian crude. To make up for the Iranian shortfall, the US, along with Saudi Arabia and UAE will increase their output. However, US oil is light and sweet and that will not fill the needs for Saudi Arabia, South Korea, or India as they rely on a heavier sour crude. It will be key for Saudi Arabia to deliver on production increases, a key u-turn from their over-delivering on production cuts from OPEC + production agreement.
China reiterated their frustration with the US regarding the ending of sanction waivers and accused the US of reaching beyond their jurisdiction. The focus will now fall on what will Russia do with their production. OPEC and allies meet in Jeddah in the middle of May.
The precious metal remains in limbo. Yes, it is holding on to key support and geopolitical risks remain in the headlines, but a better than expected earnings season could weigh on gold prices.
The Iranian story helped gold rise off the lowest levels of 2019, but the next move may rely more on earnings outlooks and first-quarter US GDP results on Friday.
Bitcoin is up 2% on the day and approaching the highs April highs made earlier in the month. The cryptocurrency has had a great month, but that could come to an end as it has not seen any major increase in transactions or unique addresses. If the bulls win here, initial resistance lies at $5,500 and major resistance will fall at the $6,000 level.