Macro economics

Analytics on 24/04/2019. Energy stocks drive European markets lower, euro remains under pressure

After record-high closes in U.S. equities, European markets are trading mostly lower as strong earnings failed to offset retreat in energy stocks as oil prices are struggling to extend the rally. Speculations that China would likely hold off on further cuts to banks’ reserve requirement ratio adds to investor worries. In corporate news, Credit Suisse reported an increase in first-quarter net profit, beating analyst expectations. Shares of the lender rose more than 2% after the release. The bank reported a net income of $733.93 million, an 8% increase year-on-year.

Against this backdrop, Britain’s FTSE 100 sheds 0.25% to 7,504, France’s CAC 40 is down 0.03 percent to 5,589, while German DAX 30 adds 0.79% to 12, 331. US stock index futures are slightly lower Wednesday morning, as investors are looking ahead to another portion of corporate earnings.

After yesterday’s quick drop below the 1.12 handle, EURUSD remains under pressure and continues to challenge the psychological support. In its monthly economic bulletin, the ECB said that the immediate impact of the US car tariffs would be small but admitted that escalating trade tensions could have grave consequences for global economy. According to the central bank’s estimates, Eurozone car industry would incur losses of 4% on US tariffs.

On the data front, the headline German IFO business climate index came in at 99.2 in April, weaker than last month’s 99.6 and missed the consensus estimate of 99.9. Meanwhile, the current economic assessment also missed expectations, arriving at 103.3 points as compared to last month’s 103.8 and 103.6 anticipated. Another bearish report increased the selling pressure on the common currency though the pair continues to cling to the 1.12 mark in the short term.

USDJPY shows directional intraday fluctuations and turned flat during the recent trading. The pair still struggles around the 112.00 as the risk sentiment looks subdued. On the other hand, the dollar derives some support from relatively positive US economic data and could make a bullish breakthrough should investor sentiment improve in the near term. On the downside, the 111.75 figure represents the immediate support, while the key level comes at the 200-DMA around 111.50. As long as the greenback remains above this area, bearish risks are limited.

Crude oil prices retreated earlier in the day but the downside pressure is muted as the overall sentiment in the market remains bullish after the US announced the end of six months of waivers that allowed Iran’s eight biggest buyers to continue importing limited volumes of Iranian oil. The recent correction in Brent was due to the assumption that that global markets remain adequately supplied despite tighter US sanctions against Iran due to ample spare capacity from the Middle East. Meanwhile, the API report showed that US crude oil inventories rose by 6.9 million barrels in the week to April 19 to 459.6 million, which added to the local pressure on prices. However, considering that investors are still focused on the potential supply shortage, Brent could resume the rally in the short term and extend gains in the medium term.

Nathan Lambert, Head of Global FX Analytical Department

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Interest rates

Country Rate Value
USA Federal Funds 2,50 %
Switzerland 3 Month LIBOR Range -0,73 %
United Kingdom Repo Rate 0,75 %
EU Refinancing Tender 0,00 %
Japan Overnight Call Rate -0,10 %
New Zealand Official Cash Rate 1,5 %
Australia Cash Rate 1 %
Canada Overnight Rate Target 1,75 %
All rates

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