Summary:

• Asian stocks follow their counterparts in the US registering sizeable losses as the US 10Y yield keeps moving around 3%
• US dollar keeps on pushing higher along with higher rates, Antipodean currencies suffer the most
• Oil trades sideways after a surprising build in stocks reported by API yesterday

Although the US 10Y yield has been unable to push much above 3% so far, it turned out sufficient to daunt investors all around the world. Consequently, major indices in the US made a loss being additionally fuelled by some disappointing earnings. At first let’s focus on Caterpillar (CAT.US on xStation5) which boasted about an excellent profit for the first quarter, but the overall outlook was clouded by the details of the statement suggesting that material cost increases this year will likely come in above estimates due to higher steel prices. Google parent Alphabet (GOOG.US) tumbled almost 5% despite a decent net profit, the major reason were again rising costs and related concerns how they may influence the upcoming months. These informations along with a breakout of 3% at the 10Y yield resulted in a massive 1.75% drop in the Dow Jones (US30). The NASDAQ (US100) plunged 1.7% while the SP500 (US500) slid 1.35%. Downbeat moods were present in Asia as well as most of indices are trading almost 1% lower for a while before the close with shares in Hong Kong (CHNComp) suffering the most.

The US100 smashed its closest support line at it’s already approached a 150DMA. Source: xStation5

First and foremost, it needs to be noticed that bearish momentum is quite powerful and therefore there is no point to trading against the market until any bullish signals are finally sent. The price broke through 6640 points and it quickly moved to its 150DMA serving as the first line of defence. A move below this line could encourage sellers to push even lower, and then a test of a 200DMA could be in play. Finally, let us point that while a touch of 3% at the 10Y yield is a symbolic milestone it actually does not change too much. Therefore one may suspect that a much higher increase would be needed to impact adversely companies’ earnings.

On the currency front the US dollar is still flexing its muscles being up against almost all major currencies in the morning. It has been obviously buoyed by higher yields to some extent, but the slew of robust macroeconomic data has played a role alike. Antipodean currencies are falling the most which could be ascribed to a holiday in Australian and New Zealand – ANZAC Day.

The NZ dollar keeps falling hard after a breakout of a trend line. It does not bode well for buyers going forward. This scheme could continue until the ongoing bounce of the greenback comes to an end (we perceive it rather as a corrective bounce not a shift in the underlying downtrend). Source: xStation5

Meanwhile, commodities are trading largely positive in the morning despite the stronger greenback. It’s worth mentioning oil prices which got a blow yesterday when the API reported that crude inventories increased 1.1 million barrels falling short of expectations pointing at a 2.25 million barrels drop. On the flip side, gasoline stocks dwindled 2.7 million barrels suggesting that oil bulls could hold out hope for a seasonal rise in demand which would drive price yet higher over the oncoming months.