Peak Optimism or Overly Bearish?
|A flood of better-than-expected corporate quarterly earning was a wake-up call to overly pessimistic investors. Snap and Twitter posted solid 1Q results triggering a broad-based rally in large-cap tech, propelling the S&P 500 to new all-time highs. Snap's revenue, generated from selling advertising, rose 39% to $320.4m well above analyst estimates of $306.6m. In commodities expectations for harder US stance on Iran sanctions pushed oil prices higher causing energy complex to gain. The USD gained against G10 currencies as opportunities in the US equity markets attracted capital globally. In addition, the higher yields (despite risk appetite improvement treasuries gained) makes the capital rotation extra sticky. It’s unlikely that the greenback dominance will fade anytime soon. Volatility is lingering around a diminishing 12.54 further encouraging risk-taking.
Overnight, China’s stocks were unable to maintain the strong goodwill as concerns over the direction of monetary policy were questioned. However, any adjustment to the PBoC dovish tone and prospect of further stimulus measures is due to improving the economic outlook. Given the incoming data, we are cautiously optimistic on China stabilization. In this context commodity prices, including crude oil and industrial metals, look cheap. China 1Q GDP came in at 6.4% y/y driven by industrial production growth. 2Q exports should rebound as a likely US-China trade deal is near and global demand continues to firm. The surge in domestic and external demand suggests that markets have underestimated China growth prospects. With policy to remain supportive of economic “green shoots” although new stimulus might not be necessary has indicated that recent Politburo meeting. It’s hard to image stocks heading higher form these lofty height however, with lower event risk, supportive central banks and improving global macro-economic backdrop corporate earnings should further improve.
Stay on top of the markets with Swissquote’s News & Analysis
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.