Equity markets across Asia are trading in red on Thursday as investors digest the latest updates on the global economic outlook and central bank decisions. ECB chief Mario Draghi reiterated that risks to the Eurozone economy remain to the downside as the central bank pledged to keep interest rates at current levels at least through to the end of 2019. Minutes from the Federal Reserve's March monetary policy meeting showed no indication of a rate cut, but several officials noted that next move may be in either direction.

The boost provided to equity markets from the shift in central banks seems to be exhausted with the S&P 500 standing 1.7% away from an all-time high. Investors hoping for an interest rate cut may not see one coming any time soon, suggesting that they shouldn't continue betting on monetary policy to push equities further.

Investors need to shift their attention to the earnings season which unofficially kicks off tomorrow. With the impact of tax cuts and government spending boosts from 2018 fading, it's time to see how companies will perform when left on their own. Earnings are estimated to decline by 4.2% in the first quarter of 2019 according to FactSet. However, if 65-70% of corporates, as usual, managed to beat Wall Street estimates, we may still see a slight growth in earnings.

One of the critical metrics investors need to watch is profit margins, especially given the spike in wage growth in Q1. If companies are not able to pass the additional cost to consumers, it may indicate further weakness to come in the upcoming quarters.

Guidance is also going to be critical for the S&P 500's next move. The index has risen 15.2% so far year- to-date, and for the rally to be sustained, investors need assurance that we're not going to hit an earnings recession. A dovish Fed won't be enough to keep the party on.

Brexit delay failed to boost Sterling

A second Brexit delay has been granted until October 31 with a review to be conducted on June 30. The good news is a no-deal Brexit has been averted for now; the bad news is no one knows what will happen next. So far, it seems that the can is just being kicked further down the road. This has led to a steep decline in the Pound's implied volatility but has done little to lift the currency. That's because the risks have just been extended and not vanished. Predicting Sterling's next move is going to be a tough task as all options remain open, including a no-deal Brexit and no Brexit at all.

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