Stocks Take A Breather After Latest Surge

Market highlights 

  • US stock futures take a breather after the latest surge to another set of highs
  • Despite a slightly weaker US dollar, oil and energy sectors are having trouble shaking Monday's brutal move lower
  • The foremost opportunity in G10 FX markets could be positioning for European activity's likely recovery
  • Gold jumps as USD and yields fall, with room for further price climbs

Markets

US stock futures are taking a breather after the latest surge to another set of highs supported by a recent run of exceptional US economic data.  Still, there are many more economic data boxes to be checked off to confirm what markets have been pricing up until now. With the SPX closing in on some significant interim targets, investors could be exhausted from chasing strength and have instead started to trim some of the higher beta parts of the markets while possibly looking to add into weakness. 

And while equity and risk markets can remain at highly elevated levels provided the macro data support, at such lofty levels investors likely need a little more confirmation at precisely what stage of the recovery we’re at, and – more specifically for bond yield concerns – exactly where inflation sits as the technical correction lower in US 10y bond yields is finding a base around 1.65.

Europe and the rest of Asia are back from the Easter holiday and were generally playing catch-up yesterday. There's a cyclical tilt to the tape in Europe; however, that too could pause in concert with US markets where lower US yields amid more robust US economic data was the accelerant that stoked markets higher. With yields basing, so too could the chase higher in stocks.

And Asia investors will continue to digest the softer credit impulse from the People's Bank of China which has asked banks to temper lending activities while simultaneously bumping capital requirements on systemically important banks. In the face of recent risks to global financial markets from the Archegos incident, the PBoC might believe it’s prudent to fortify their own house of cards against similar incidents in China. A softer China credit impulse is not great for risk, especially through the commodity channels.

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Disclaimer: The information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; ...

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