Mixed start to the week for stocks
Equities have had a mixed to start the week, with Chinese markets lagging in Asia despite opening in the green. Broader macro indicators are all leaning bullishly, however the dollar was again weaker overnight, providing a further bid to commodities – notably copper – which is trading at 10y highs. Treasuries are a touch softer while more speculative areas of the market, such as Bitcoin, have recovered some of last week's sharp losses.
Holding stocks in check, more than a third of S&P 500 firms report Q1 results this week, including Apple, Amazon, Alphabet, Microsoft and Tesla. In Europe, big banks including Barclays, HSBC and Standard Chartered report, as well as big energy companies, including BP.
April FOMC In Focus
The Fed's April meeting concludes on Wednesday. This is a "regular" meeting, so expect no forecasts or dots this time. This is all going to be about the wording of guidance and, in particular, whether Chair Powell makes any adjustment to the line, "it is likely to take some time for substantial further progress to be achieved".
India virus surge provides backdrop for OPEC+
There was more bad news on Covid-19 as infection numbers in India over the weekend continued to pressure the oil price. India is the third-largest global importer of oil, so the worsening coronavirus crisis adds to uncertainty about the outlook for global demand. The OPEC+ meeting this week will have to balance the improved view in China, the US and Europe against negative data in India and other regions. At the very least, it seems unlikely it will be possible for bulls within OPEC to make a strong case for an accelerated easing of production cuts, and there may even be a return to the more cautious stance of previous meetings.
With the ECB meeting out of the way, the focus in currency markets is on the FOMC this week. At this point, the dollar appears likely to trade soft in the run-up as Fed speakers have given little indication that they’ll change their dovish tone, despite the solid economic data.
Gold failed to break above $1,800 last week. However, buoyant US economic data continues to be a headwind for gold – watch the Q1 GDP report this week.
As President Biden's plan impacts equities, crypto and USD, gold should consolidate before running higher. Infrastructure spending will boost inflation, and when inflation rises, it provides a powerful tailwind for the yellow metal.
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Today’s key charts focus on oil, where the recent rally has stalled amidst talk of a lift in sanctions and speculation of a production boost.