15 April 2024
Daily Navigator
Key highlights
Equities: US equities down as spotlight returned to inflation
US stocks resumed their decline on Friday as higher-than-expected import prices and inflation expectations (University of Michigan) brought back the spotlight on inflation. A brewing conflict between Israel and Iran also weighed on the risk appetite. US major banks also raised the curtain on the US Q1 earnings season. Their earnings were mostly strong but forward guidance disappointed investors. The S&P 500 index fell 1.4% to end the week 1.6% lower, while the technology sector-heavy Nasdaq index slid 1.6% to close 0.5% lower for the week. Elsewhere, Asian markets traded mixed following a selloff in the previous session. The Hong Kong benchmark led losses in the region, closing around 2% lower on below-consensus China exports data for March. The mainland China benchmark also fell. Japan equities climbed higher as the JPY continued to weaken against the dollar.
Bonds/Macro: Bond yields retreated; focus turns to Iran-Israel conflict
US government bond yields retreated on Friday following two days of surge fuelled by a hot US inflation report. The US 10-year government bond yield pared back 6bps to close at 4.52%, while the policy-sensitive 2-year bond yield fell 6bps to 4.90%. Government bond yields ended the week sharply higher despite Friday’s decline. Nevertheless, Friday’s data pointed to sustained inflation pressures. The US import price index rose more than expected by 0.4% m/m, while University of Michigan inflation expectations also rose more than expected. Meanwhile, US consumer sentiment fell more than expected to 77.9. In China, exports fell more than expected by 7.5% on a year-on-year basis, while imports also improved less than expected. Credit data was mixed – aggregate financing improved but money supply slowed unexpectedly to 8.3% y/y. On geopolitics, over the weekend, Iran launched a barrage of drones and missiles in an unprecedented direct attack on Israel. The heightened tensions may add a temporary geopolitical premium to crude oil prices. In the week ahead, besides Israel’s response, the focus is likely to be on US retail sales, China Q1 GDP data and UK consumer inflation.
FX: USD surged on Iran-Israel tensions; geopolitics, US retail sales in focus
The USD (DXY index) rose 0.6% amid a safe-haven bid after a rise in geopolitical tensions between Israel and Iran. Meanwhile, renewed policy rate divergence between the Fed (as it holds rates for longer) and other major central banks is likely to support the index to test its resistance at 106.8. US retail sales data will be closely watched today. EUR/USD fell for the fourth consecutive day, easing 0.7% to a 5-month low. Focus is likely to turn to Euro area economic sentiment index tomorrow. While the pair is nearing oversold territory, the momentum indicator (MACD) shows no signs of a crossover yet, suggesting potential further downward pressure in the near term. We expect it to test support at 1.0520. USD/SGD rose 0.5% after the Monetary Authority of Singapore left its policy unchanged as expected, maintaining the prevailing rate of appreciation of the trade-weighted SGD. USD/SGD is likely to test resistance at 1.3720 amid a strong greenback.
Chart of the day
The USD rose to a 5-month high on safe-haven bid and renewed widening of rate differentials
Friday’s market moves
Summary table
Technical charts
Technical charts (cont.)
Technical charts (cont.)
Our 12-month asset class views at a glance
Economic and market calendar
The next support for US 10-year government bond yield is at 4.39%
Technical indicators for key markets as of 12 April close
Market diversity of Gold is below the key 1.25 threshold, suggesting a high risk of reversal
Our proprietary market diversity indicators as of 12 April close
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