Mixed US earnings brought subdued US session: S&P 500, Hang Seng Index, AUD/NZD

Market Recap

Mixed results from US earnings overnight translated to a subdued session in Wall Street (DJIA -0.03%; S&P 500 +0.09%; Nasdaq -0.04%), but this comes as the S&P 500 hovers near its 2023 high, which may render some resistance.

On the earnings front, Bank of America has topped expectations on higher interest payments and bond trading revenue. However, this resilience was not mirrored in Goldman Sachs’ results, dampening some optimism overall. Weaker-than-expected bond trading revenue, lower demand for investment banking and a $470 million hit tied to the sale of consumer loans left Goldman Sachs to trail the strength in the broader sector.

Netflix’s mixed results after-market put sentiments on further indecision. A slight earnings beat was shrugged off, following a big miss in global streaming paid net additions (1.75mn versus 7.66mn last quarter, 2.41mn consensus). However, market participants took comfort that a crackdown on shared accounts in the US may reap some financial benefits ahead and its new ad-supported service has contributed to some gains. Netflix’s share price was down as much as 11% after-hours but has since recovered almost all of its losses.

Following a slight bounce off a near-term support, the US dollar (-0.3%) has failed to find any positive follow-through yesterday, providing the go-ahead for gold prices to reclaim its key US$2,000 level. Further weakness in the US dollar ahead may bode well for equities as well. The S&P 500 has been inching higher over the past week with improving market breadth, suggesting more broad-based participation for its advance. Tech earnings will be the key driver here, with its heavy composition in the index. The 4,200 level will be on watch as near-term resistance to overcome. Clearing the level may pave the way to retest its 2023 high at the 4,320 level next.

Asia Open

Asian stocks look set for a muted open, with Nikkei -0.27%, ASX +0.11% and KOSPI +0.34% at the time of writing. Despite economic data showing China’s recovery largely on track yesterday, Chinese equities failed to find a significant move higher, potentially as growth still remains uneven while hopes for further stimulus have dampened. It may still be a worst-is-over story, but recovery has shown be more gradual than a one-shot wonder.

Its March retail sales have been a blowout (10.6% versus 7.4% consensus) but industrial production (3.9% versus 4% consensus) and fixed asset investment (5.1% versus 5.7% consensus) underperformed. The Nasdaq Golden Dragon China Index pared initial gains to close flat (-0.1%) overnight.

The Hang Seng Index has managed to defend its 200-day moving average (MA) thus far. On the weekly chart, further upside over the coming weeks may also potentially lead to the formation of an inverse head-and-shoulder pattern (still pending the formation of the right shoulder currently). Any subsequent break above the head-and-shoulder neckline may pave the way to retest its 2021 high at the 30,800 level based on the general projection from its neckline.

On the watchlist: AUD/NZD back at key resistance on hawkish RBA minutes

Tints of hawkishness in the recent Reserve Bank of Australia (RBA) meeting minutes have prompted an initial move higher in the AUD/NZD yesterday, although gains were quick to fade at a key resistance zone. The central bank’s decision to pause its hiking cycle in early April has been a close call, with the case for another 25 basis-point hike being discussed. Still-high inflation and a tight labour market were considerations for a further push in rates towards more restrictive territory.

With the surprise takeaway from the minutes, rate expectations will remain highly sensitive to incoming data, which will be on watch to provide further conviction that the broader trend of pricing pressures is still to the downside. Near-term resistance stands at the 1.086 level – a potential Fibonacci confluence zone. A move above this level could pave the way towards the 1.103 level next.

Tuesday: DJIA -0.03%; S&P 500 +0.09%; Nasdaq -0.04%, DAX +0.59%, FTSE +0.38%