Indices at week highs after positive Apple earnings

Market Review

Yesterday's market movement was very contained in most assets. The EURUSD traded in a 35 pip range for 6 hours between 11am and 5pm, with a similar level of volatility being true for most other dollar denominated currency pairs as well. Arguably the largest mover of the day was crude oil, which saw a move down through Friday’s low and found support just below the $81 handle. Arguably the most important happening in the equity sector yesterday was the earnings report from the worlds most valuable company by market cap, Apple, and as per the norm the company did not disappoint investors. Unit sales were closing in on 40 million items for the iPhone, with many other units exceeding expectations, with the exception of the iPod and iPad: iPad sales saw a drop to 12.3 million, from 13 expected. Overall the report was viewed favourable for Apple, and the company is currently playing with the $100 handle. The US10Y entry was as the only strategy obtained yesterday, although it ended the day flat. 

Today's Fundamental View

The positive news from Apple has helped lift stocks across the board this morning, with both the Nasdaq, S&P and European indices trading at new highs for the week. We assume this sentiment to continue to go through the market, as this may give boost to bulls that have been awaiting more confirmation for this earnings seasons success. This morning news arose that the ECB may be investing in the second hand corporate bond market. This will aid our equity strategy, and we have seen a move away from safe haven assets. With this in mind the euro may react two ways, although for now we favour the downside pressure due to the expansionary policy argument. Overall we are very happy at this point in time, with both technology [with the notable exception of IBM] and especially financials performing well. Total’s CEO, Christophe De Margerie, passed away yesterday as the plane he was a passenger in was damaged by an alleged drunk snowplough driver, and eventually crashed. De Margerie was three months ago caught advocating that there was no reason for why crude oil should be settled in American dollars, and with this we can imagine Vladimir Putin’s wrath over the CEO of one of the largest oil companies in the world being killed on Russian soil, as the country is currently battling western sanctions. On crude oil, Saudi exports fell for the forth month in a row as it battles other oil rich nations for market share. Saudi Arabia’s reliance on crude oil is perfectly illustrated by the stance it has taken in this situation as it could easily battle the price by cutting production more drastically. We have previously discussed the possibility of this being a wider form of sanctions against Russia, and still do not shut the door for the price of crude being used as a weapon rather than it being purely work of market forces. Today’s strategy will continue to short oil, with a long strategy being implemented on stocks

Alternative View

Earlier developments in the Eurozone have seen sentiment shift in the currency space and the equity markets. We advise traders bear this in mind going into the afternoon and prepare for a change in sentiment should any market players dictate a new direction. We also suggest that traders remain wary and informed of any geo-political risk events that may develop as the day progresses.