• Big Tech beats but futures sell-off
• Euro GDP data beats
• Nikkei -1.52% Dax -0.40%
• UST 10Y 0.822
• Oil $36.00
• Gold $1872/oz.
• BTCUSD $13222.

Asia and the EU

• EU GDP 16.%

North America Open

• USD Personal Income/Spending 8:30
• USD U of M

A slew of BIg Tech earnings last night handily beat forecasts but investors were unimpressed with forward guidance and pushed stock index futures sharply lower in Asian and European session trade.

Nasdaq futures were down by nearly 2% before rebounding slightly maintaining the negative tone that started last week. As we noted a few days back earrings and guidance would be key to market momentum and while the former showed massive upside surprise the latter was far more cautious as companies remained concerned about the long-term impact of COVID on demand.

Many analysts have also pointed out that the rise in 10-year rates has added greater volatility to the high flying Nasdaq leaders which have been trading at multi-decade high valuations. As US real yields rise they provide competition to those equities and even massive earnings gains offer no protection from selloff especially if the earnings growth pace cannot be sustained.

Sustainability of earnings will indeed be the key for future price gains and to that effect, the corporate comments left investors less than thrilled. Facebook for example saw its earnings rise by 22% but noted “We believe the pandemic has contributed to an acceleration in the shift of commerce from offline to online, and we experienced increasing demand for advertising as a result of this acceleration. Considering that online commerce is our largest ad vertical, a change in this trend could serve as a headwind to our 2021 ad revenue growth.”

Apple also beat slightly on the earnings front but disappointed with iPhone sales and refused to provide guidance for Q1 of 2021. Given the spike in COVID cases and the prospect of lockdown across most of the OECD nations, demand for Apple’s new iPhone 12 model may be less than expected which could weigh heavily on the stock’s already stretched valuation.

In FX land the action was far more muted with most pairs essentially flat on the day with little newsflow to drive trade. In Europe, the GDP data surprised to the upside, but COVID raging across the continent, and authorities now considering the possibility of yet another lockdown traders were not keen to take any risk-on positions, and currencies remained in a state of uneasy equilibrium.

In North America today the markets will get a look at Personal income/spending and the latest U of M data. The US consumer has been surprisingly resilient but the forecasts are for essentially flat month over month readings and if they are correct the funda data will not provide much support for equities as the day proceeds and investors may choose to continue profit-taking into the weekend.