Taking the bull by the horns

Investor sentiment remains mixed faced with the strong jobs report pointing that the Federal Reserve’s (Fed) substantial progress may be happening, as Joe Biden charges with another massive fiscal spending package. The US 10-year yields remains contained, but investors continue scratching their heads regarding the rising inflation expectations and how to take the bull by the horns as the S&P500 is approaching the 4100 level. 

With strong economic data, the global vaccination campaign, huge fiscal and infrastructure spending, combined to such a supportive Fed policy and the so-called reflation theme, the S&P500 has room to extend gains above the 4100 mark. Energy stocks are well positioned to benefit from a leg higher on the back of Biden’s pledge to support oil companies and resilience in oil prices near the $60 per barrel following OPEC+ decision to start unwinding the production cuts gradually. 

But, according to a Bloomberg survey, investors went from feeling positive or neutral to feeling negative and disquieting since last December, as the worries of an eventual overheat in the economy and overshoot in inflation could bring the highly accommodative Fed to review its policy and to step back to a certain extent. Yesterday’s FOMC minutes should help easing a part of the hawkish worries, and remind investors that the financial conditions will remain loose enough for at least another two years. But the key for Jerome Powell is to repeat the Fed’s commitment over and over again to keep investor nerves’ well soothed.  

Due today, the US weekly jobless claims could still spur the Fed hawks and tame the risk appetite, if the data confirms the continuation of improvement in US jobs market. 

Elsewhere, demand in gold is boosted by additional infrastructure spending and the positive pressure on inflation expectations. The price of an ounce is preparing to test the $1750 resistance. Gold bulls should definitely win the $1750-battle to reverse the medium-term negative trend in gold. Otherwise, the third bearish charge on the 1680 level will likely be successful.  

The EURUSD has likely completed the tactical positive correction near the 200-day moving average and the top of its three-month down-trending channel. Current levels could be interesting top-selling opportunities for bears aiming for a deeper downside move to 1.16 level ahead of the German industrial production and trade balance data. The latest data should meet improved expectations, but the third wave which prevents the economic activity from picking up momentum in Europe despite the vaccination efforts could also keep the investor sentiment weak when it comes to the strength of the euro.  

Finally, in company news, Samsung just couldn’t hide its joy and wait the end of the month to announce its expectation of a 44% jump in last quarter’s profit thanks to strong sales of smartphones and home appliances. The launch of its latest smartphone clearly boosted the first quarter numbers, as the smartphone sales stood for nearly a quarter of Samsung’s overall sales last quarter, up from 16%. Although, there are reports that the global phone sales are falling, with 10% less phones sold over the past year, the fact that LG decided to quit the smartphone market is an opportunity to increase its market share. But more importantly, what really makes Samsung appealing to investors is the skyrocketing chip demand, and Samsung is well positioned to further surf the chip wave in the coming quarters.