Yesterday’s market action

Given this is my last day of freedom for the next 24 years, I thought I’d do a Jim Reid and inform you that I am indeed getting a puppy over the weekend. We are very excited about this new development and looking forward to many sleepless nights to come. The NASDAQ seemed to have a sleepless night as we saw the index break above the tech-bubble high of 2000(AD) in the cash market overnight. Earnings yesterday saw a beat from Caterpillar on both earnings per share and revenue, a surprise to many as the majority of analysts expected a miss on revenues due to the strong dollar. Overnight we saw Amazon and Microsoft print higher also, eliminating the last of the big three which suffered last quarter as a result of dollar strength. This elevated the NASDAQ to the aforementioned historic high and this morning trades above and beyond, topping out at 4514.75 on the June future contract. We saw weaker than expected data coming from the US yesterday as we saw a miss from the Manufacturing PMI for April print at 54.2, down 1.5 from the March number. New Home Sales also disappointed with a -11.4% decline on the month. Initial Jobless Claims printed below 300k, in line with the majority of analysts’ calls.

Today’s View

Today sees the Eurogroup meeting in the Latvian Capital go ahead; we have live reports suggesting that Tsipras and Finance Minister Varoufakis are not having an easy time of it. Varoufakis has been called a time-waster, a gambler and an amateur by Euro-area finance chiefs and has been “heavily criticised from all sides”. Sources for irritation was allegedly Tsipras’ attempt to seek funding from Fr. Merkel, a move that would bypass the Eurogroup veto enforced earlier in negotiations. This has sparked a new wave of downside in European bourses; the Bund returned to its previous highs with some pullback during the press-conference by the Eurogroup where comments calmed markets after a continuation of the risk-off move on the back of Greek talks. It is notable that the Eurogroup reports focused relatively little on the Greek situation.

Ahead today we have Durable Goods Orders at 1330; with good results from Caterpillar, Lockheed Martin and Boeing, it is possible that we will see a beat of this number. The Ex-transportation and non- defence, excluding air number is likely to post in-line/lower as the dollar strength argument could be applied here. Tonight we have the Baker Hughes US Rig Count; this is likely to not affect markets as much as we have seen a shift in focus to the class of rig being shut down. The closures have not been seen to affect output as the gap has been filled by few but more efficient “horizontal” onshore rigs.

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