The first quarter of 2024 concluded with a flurry of earnings reports that painted a complex picture of the corporate landscape. While some industry titans like Tesla grappled with disappointing revenue figures and shrinking profit margins, investor optimism still ran high for the electric vehicle maker. This buoyancy can be attributed, in part, to Tesla’s forward-looking strategy, which includes the acceleration of new model launches and promises of greater affordability.
Despite Tesla’s lackluster results, many analysts suggest that this surge in the stock price may be temporary, especially if rising challenges continue to impact the company’s performance.
In contrast, technology juggernaut Apple managed to stay afloat despite a concerning drop in Chinese iPhone sales. However, chipmaker Texas Instruments delivered bullish forecasts, suggesting a potential easing in the downward pressure on the semiconductor industry. The music streaming giant Spotify also saw a strong rally after hinting that recent pricing adjustments have yet to seriously impact customer growth.
Overall, company-specific news seems to have had limited negative effects on the market. In fact, even seemingly unfavorable results were often met with investor enthusiasm. One of our analysts believes this is due partly to a dip in US yields, spurred by less-than-stellar PMI figures, and a strong sale of US 2-year treasury notes.
Forex Markets See a Shift on Diverging Global Data
Analysts note that the US dollar softened in response to the release of S&P’s survey, which indicated a slowdown in the expansion of the US services sector and a surprising contraction in manufacturing, causing some analysts to revise their expectations. This weakening of the dollar benefited its peers.
Interestingly, the EUR/USD pair showed positive momentum even before the release of the US PMI figures. This uptrend appears to be fueled by the surprisingly upbeat PMI data from Europe, specifically Germany and France. While German manufacturing figures were slightly below expectations, the overall positive sentiment stemming from the Eurozone’s PMI readings was enough to push the EUR/USD pair above the 1.07 mark.
Market observers will closely monitor key data releases today, including the German sentiment index, the 10-year Bund auction, US durable goods orders, and the 5-year Treasury note auction.
International Markets See Developments
In Japan, the yen inched upwards yesterday; however, these gains were modest as the Bank of Japan is rumored to be focusing on stemming the depreciation of the yen during their meeting this week. One of our analysts believes that it will be difficult to reverse the yen’s bearish trajectory in the medium term without concrete signals from the BoJ that further rate hikes are on the table.
The Australian dollar extended its gains against the US dollar, reaching the 200-day moving average after surprisingly strong inflation data bolstered RBA rate hike expectations. While the trend and momentum indicators suggest a bullish turn, there is a degree of risk stemming from the potential for a reversal of the dollar’s recent weakness. This could be driven by robust Q1 GDP data in the US or by the core PCE index figures, both of which could dampen expectations of Fed rate cuts.
Equities Remain Robust, Led by Europe
The improved economic activity highlighted in the latest PMI data lifted European markets, particularly the Stoxx 600. Analysts predict that this could bode well for bank earnings which are expected to be released over the coming days. Rising ECB interest rates and attractive capital returns have already lured investors to the European banking sector. However, to maintain this positive momentum it is crucial for banks to post strong earnings results.
One of our analysts observes that the UK’s FTSE 100 reached new heights and is likely to continue profiting from a growing reflation trade which should support stocks in the mining and energy sectors.
Although US markets experienced some volatility, lower yields provided a boost to the S&P 500. While tech stocks led the rally, analysts express divergent views on the sustainability of this upward trend, especially with earnings for mega-cap tech giants on the horizon. Market expectations are lofty, and reactions to the upcoming reports could prove volatile.
