Wall Street remain stuck in its ranging moves: Gold, NZD/USD, Brent crude

Market Recap

It was another flat session in Wall Street overnight, as earnings releases thus far still failed to provide the catalyst for a break to a new higher high for the S&P 500 and Nasdaq, keeping the indices stuck on its ranging moves. Morgan Stanley was the latest bank to report earnings, with higher costs and the sluggish environment for deal-making dampening some optimism around its top and bottom line beat. Nevertheless, its share price managed to pare initial losses to eke out a 0.7% gain by the close.

More action seems to come after-market, with Tesla’s results not providing much to cheer. Slashing prices to support growth in the US and China translated to its lowest quarterly gross margin in two years and a miss in 1Q profits. On a broader scale, what it reflects is the tough environment for corporates to sustain demand and downside risks to earnings over coming quarters remains. Particularly for Tesla, further price cuts announced suggests that earnings and margins may continue to take further hit ahead. Its share price is down 6% after-market.

On the economic front, more persistent pricing pressures in the UK seem to put a 25 basis-point (BP) rate hike back on the table for the next Bank of England (BoE) meeting in May. While rate expectations for the Federal Reserve (Fed), remains well-anchored, Treasury yields continue their creep higher, keeping the US dollar afloat above its key 101.30 level.

A stronger US dollar may not be positive news for gold prices, but the strong defending of its lower channel trendline with volume build-up yesterday has been noteworthy. Lower highs in moving average convergence/divergence (MACD) still suggest abating upward momentum for now, but a breakdown of the near-term channel pattern will have to take place for greater conviction of a wider retracement in place.

Asia Open

Asian stocks look set for a slight negative open, with Nikkei -0.19%, ASX -0.21% and KOSPI -0.21% at the time of writing. The Asian session will leave investors to digest the fresh Tesla’s results, while US futures are still trending within its relatively lower-volatility state with some slight losses.

A no-change in the one-year medium-term lending facility from the People's Bank of China (PBOC) earlier this week suggests that an inaction may play out for the one-year and five-year loan prime rate today as well. On another front, lower-than-expected New Zealand’s inflation rate (6.7% versus 7.1% forecast) helped to provide some justification for the central bank to consider a rate pause ahead, with tighter policies feeding through to lower prices.

Less hawkish expectations have not been well-received by the NZD/USD, which continues to drift lower from the 0.622 support-turned-resistance level. The formation of near-term lower highs and lower lows seem to instil an overall downward bias for now. Further downside may leave its March 2023 low on watch at the 0.607 level.

On the watchlist: Potential gap-filling for Brent crude prices in place

Brent crude prices have shrugged off the larger-than-expected decline in US crude oil inventories yesterday, with a firmer US dollar and the subdued risk environment having a greater say in keeping prices down. This comes upon a retest of technical resistance at the US$86.90 level, which has established a track record of weighing on prices on at least four occasions thus far – a crucial level that the bulls will have to overcome.

With a break below a trendline support, Brent prices seem to be looking to fill the gap, leaving the US$80.00 level on watch next. A bearish crossover on MACD may also support a reversal in momentum to the downside for now.

Wednesday: DJIA -0.23%; S&P 500 -0.01%; Nasdaq +0.03%, DAX +0.08%, FTSE -0.13%