Spot values at a glance:
Asian stocks climbed as the latest bout of earnings results buoyed sentiment in the technology sector and traders monitored a historic meeting between the leaders of North and South Korea. The dollar held gains and Treasuries rebounded. The euro languished near 3-month lows after the European Central Bank kept interest rates unchanged.
Historic Talks Between North and South Korea Commence:
Kim Jong Un on Friday became the first North Korean leader to enter South Korea since the peninsula was divided almost 7 decades ago as talks begin over dismantling his nuclear weapons program.
At 9:30 a.m. local time, Kim was greeted by South Korean President Moon Jae-in at Panmunjom village before stepping across the border. They together stepped onto the northern side of the dividing line before returning to the south. The symbolism-laden meeting, the third between leaders of the nations since the Korean War and the first since 2007, will go a long way in determining whether Kim can eventually strike a deal with US President Donald Trump.
US Stocks Mixed as Investors Eye Earnings:
Wall Street ended mixed on Monday as concerns about soft smartphone demand weighed on tech stocks and pulled the Nasdaq lower while earnings optimism protected against deeper losses. Tech stocks dragged on both the S&P 500 and the Nasdaq ahead of a big week of earnings for the sector. Chipmaker shares dropped after the world’s largest contract chipmaker, Taiwan Semiconductor Manufacturing Co Ltd, cut its full-year revenue target due to softer demand for smartphones.
Analysts expect earnings growth at S&P 500 companies of nearly 20% in the first quarter, the strongest showing in 7 years, according to Thomson Reuters data. Google parent Alphabet Inc was up slightly in volatile after-hours trading following its earnings release; the company reported a 73% jump in profits in the first quarter.
Quarterly results are expected this week from 181 S&P 500 companies, including technology heavy-hitters Facebook Inc, Microsoft Corp, Amazon.com Inc and Intel Corp.
ECB Holds Rates:
The European Central Bank maintained its pledge to move slowly in removing euro-area stimulus, setting the stage for President Mario Draghi to face questions over a recent spate of weaker-than-expected economic data.
Policy makers reiterated that they’ll continue buying 30 billion euros of assets a month until at least the end of September, while linking the conclusion of quantitative easing to a sustained adjustment in inflation. They kept interest rates unchanged and repeated that they expect borrowing costs to stay at present levels until well past the end of net bond purchases.
The key question facing the ECB president is whether the subdued momentum warrants further caution as policy makers prepare to potentially phase out bond buying later this year. Growth concerns come on top of risks emanating from global trade restrictions and a stronger euro, which threaten to undermine the region’s export-heavy economy.
Inflation, meanwhile, remains well below the central bank’s goal, and was unexpectedly revised to 1.3% in March from an initial estimate of 1.4%. Several policy makers have expressed confidence nonetheless, with Executive Board member Yves Mersch arguing that the dip in price pressures has been less pronounced than expected.
Earnings Propel Tech Rebound:
Shares of tech stocks rebounded after hours following blowout earnings reports from heavyweights Amazon.com and Intel. The biggest ETF tracking the industry, the PowerShares QQQ Trust rose 1.4% post-market, following a 2.1% gain during the regular session fuelled by Facebook and AMD results.
It’s the latest show of tech resilience after the reporting season started out on a sour note, with concerns over Google’s spending plans sparking a selloff Tuesday that erased $85 billion of market value from the FAANG complex of stocks. That loss was completely reversed 2 days later after Facebook’s results showed no signs of damage from a data privacy controversy.
Now investors look to be in for another day of strong gains, with robust results from Amazon.com and Intel lifting their shares at least 6% after exchanges closed. Amazon.com forecast second-quarter profit that topped analysts’ forecasts, buoyed by swelling ranks of Prime subscribers and a profitable cloud-computing division that’s winning more corporate customers. Its shares were trading above their record-high closing price during the post-market session.
BOJ Maintains Stimulus and Yield Target:
The Bank of Japan left its monetary stimulus program unchanged on Friday, in line with expectations, as Governor Haruhiko Kuroda started his sixth year at the helm just as he did the other five, in pursuit of 2% inflation.
The central bank also removed previous wording on reaching 2% inflation around fiscal 2019, while leaving its inflation forecasts largely unchanged. The change underscores just how much more time will be needed to reach its 2% target, even as other major central banks move further down the road to policy normalization.
Kuroda is expected to reiterate his intention to carry on with the stimulus at a press conference later today. Doing so would likely provide a tailwind for the yen, which has weakened recently as US bond yields have risen, widening the gap between returns in the US and Japan.
Singapore Home Prices Rise More Than Expected:
Singapore’s home prices surged even more in the first quarter than a preliminary report from the government showed. Private residential prices jumped 3.9% from the previous quarter, according to final data from the Urban Redevelopment Authority. That’s up from a 3.1% preliminary estimate earlier this month.
The biggest increase in home values since 2010 has added to signs that the city-state’s housing market is warming up after a 4-year slump. That’s even as officials keep a range of cooling measures in place, including an increase in taxes on home purchases exceeding S$1 million, implemented in February.
Weekly Thematic News:
A cyberattack that US natural gas pipeline owners weren’t required to report has lawmakers taking a closer look at how the industry is handling such threats, raising the prospect of tighter regulation.
At least 7 pipeline operators from Energy Transfer Partners LP to TransCanada Corp. said their third-party electronic communications systems were shut down, with 5 confirming the service disruptions were caused by hacking.
Though the cyberattack didn’t disrupt the supply of gas to homes and businesses, it underscores that energy companies from power providers to pipeline operators and oil drillers are increasingly vulnerable to electronic sabotage. It also showed how even a minor attack can have ripple effects, forcing utilities to warn of billing delays and making it more difficult for analysts and traders to predict a key government report on gas stockpiles.
This isn’t the first time hackers have had oil and gas pipes in their sights; the Congressional Research Service reported intrusions targeting pipeline communication systems back in 2012. A web attack could “disrupt pipeline service and cause spills, explosions, or fires – all from remote locations,” the service said in a report.
With cybersecurity becoming an increasingly important component of businesses and national security, cybersecurity industry growth is expected to continue expanding at an exponential rate. Investors can choose to park some money in this growing trend by buying into the Cybersecurity US portfolio on iAdvisor, which has returned 28.7% from a year ago as of Thursday.
Interest rates are rising, making debt much more expensive for capital-intensive industries across America. But there’s at least one exception: the solar business.
While the cost of borrowing has been increasing since 2016, some banks are taking a smaller cut to win deals from solar developers. Loans of 7 years or longer can be obtained for 137.5 basis points over Libor, down from as much as 200 basis points last year. Even the higher-rate loans for residential projects are getting cheaper.
More than $200 billion has been spent in the U.S. on utility-scale solar farms and residential systems over the past decade. Many projects were funded when interest rates were near zero in the years following the financial crisis. After a dropoff in the past two years, installations are expected to increase in 2019 and 2020, according to Bloomberg New Energy Finance.
Investors looking to invest in the solar energy space can purchase the Solar Energy US portfolio on iAdvisor, which has outperformed all 28 portfolios over past 12 months, returning 48.3% as of Thursday.
USDSGD pared Thursday’s decline earlier today, and looks poised to retest its 9-week high around the 1.3300 handle. The pair has recently broken out of its 17-month long downtrend channel; the next resistance region lies between 1.3340 (3-month high) and 1.3400 (200-day moving average). A breakout above this region would signal a trend reversal and a new higher target of 1.3700.
AUDUSD briefly declined to a fresh 2018-low earlier today despite upbeat Aussie Q1 PPI released earlier today, underscoring the bearish bias in the currency pair. A strong showing in US GDP numbers tonight may push the pair closer towards the key 0.7500 level.
All signs are pointing to more downside for the AUDUSD. The pair’s bearish break below the key support of 0.7650 has to lead to increased bearish bias for the AUDUSD. In addition, the longer 2-year uptrend was broken earlier this week.
USDCAD regained to near its 3-week high earlier, just short of the 1.2900 handle, following overnight USD strength. The pair was already posting strong weekly gains on the back of a cautious tone from Bank of Canada Governor Poloz earlier this week.
To the upside, the 10-month high of 1.3125 remains a strong resistance target.
USDCNH traded higher Friday, nearing a 5-week high 6.3421 on the back of USD strength. In addition, the PBOC today weakened its fixing by 0.17% to 6.3393, its lowest in a month and weaker than what analysts were expecting.
Nonetheless, the currency pair still remains mired within its trading range over the past 3 months. A break above the high of 6.3774, which coincides with its 100-day moving average, may signal a potential shift in the direction of USDCNH over the longer term.
USDJPY was little changed following the BOJ’s policy decision earlier, in which the central bank decided to delete the mention of the time frame from its outlook report, thus indirectly indicating its 2% inflation target will likely remain out of reach for a few years.
The currency pair currently is trading near a 10-week high. The resistance around its 200-day moving average of 110.25 will be key.
It was a fairly volatile past couple of weeks for GBPUSD as the pair retraced from its post-Brexit high of 1.4377 reached last week to a 6-week low of 1.3895 yesterday. The pound has been weighed down recently by poor macroeconomic data in the UK and dovish comments from BOE officials.
The longer-term trend remains to the upside, with the pair still up over 15% from its lows in January last year.