Market update: Stocks drop on profit worries, oil traders retreat on the Macron-Trump buddying

25 Apr

by Mihály Tatár


Good Morning!


  • The news that bond yields creeped higher and the US 10Y yield finally touched 3%, coupled with the impression that corporate profits are already topping out in this quarter, made a good case for selling (SPX -1.34% – we are right back at the critical level from the beginning of the year, Nasdaq -1.74%, DAX -0.17%, Nikkei -0.39%, Shanghai -0.29%, Google -5%, Caterpillar -6%, Apple -5%). Further humiliating Berlin’s anti-Trump-on-whatever politics – and probably not ending well for the German economy -, Macron received a majestic welcome in Washington, and the French President even proposed his own version of a ’built up’ Iran accord, which sent oil prices immediately lower (WTI 67.70, Brent 73.90 USD, as outlined yesterday). We don’t know Trump’s real reaction to the plan, but to be sure, he threatened Teheran again (the ’insane and ridiculous’ deal ’should have never been made’, ’if they restart their nuclear program, they are going to have bigger problems than ever’). Most currencies consolidated a bit after the big moves (EURUSD 1.2220, GBPUSD 1.3960), with traders trying to figure out what Draghi will say at tomorrow’s important ECB meeting. (Eurozone economic indicators have become a touch weaker since the rapid expansion in 2017, prompting several banks to expect a super relaxed ECB when it comes to tightening. Currently, most of the market expects the first rate hike in mid-2019, but as we know from the example of the Fed, financing costs and yields – in this case for the Euro – start to go higher as soon as a central bank becomes visibly optimistic.) Regional currencies weakened somewhat further (EURHUF 312.70, EURPLN 4.209, EURHRK 25.44), with the super dovish,  to-boost-lending  Hungarian Central Bank and the ongoing talk that EU transfers could be cut by 10%-20% into regional countries, to prefer the South (Italy, Spain etc.) instead.


Have a nice day,



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