Stocks surge as risk-on returns; USD gains on solid data

Summary:

  • Stocks build on recent recovery

  • DE30: Thyssenkrupp enjoys another share spike

  • USD gains after solid data

  • Pound drifts lower as PM May departure date in focus

  • Cryptocurrency outlook

 

US stock markets are working on a third consecutive day of gains as equities across the Atlantic continue their recovery from Monday’s rout. Yesterday afternoon they received a boost from news that president Trump is delaying a decision on auto tariffs by up to 6 months and are enjoying a solid day of gains. The S&P500 is now back at the 8 EMA and with the volatility index falling back below the 16 mark there is some suggestion that the fear which gripped traders earlier this week has quickly subsided.

 

Thyssenkrupp (TKA.DE) was the best performing DAX member on Thursday morning. Let us recall that the company recently announced that it won’t chase JV with Tata Steel and instead may decided to sell the elevators unit. Reuters reported today that Kone (KNEBV.FI), the Finnish company, is interested in buying the elevator unit. However, no official confirmation from either company has been offered yet. Shares have gained by almost 10% on the day.

 

A pack of the US data has been released at 1:30 am BST, including housing and labour market data. The initial jobless claims reading came in at 212k, below expected 220k and previous 228k. Housing market data also surprised to the upside. Housing starts print showed 1235k against an expected 1209k while building permits came in at 1296k against expected 1269k. Note that both previous readings were revised slightly higher. Apart from that, we got another major positive surprise from the regional index. Yesterday NY Empire index jumped from 10.1 pts to 17.8 pts while today Philly Fed index came in at 16.6 pts against forecasted 10 pts. The overall tone of the datapack can be viewed as USD-positive and this is also the reaction that we are observing on the market. Beat in April’s housing market data is especially pleasing after yesterday April’s retail sales release turned out to be a disappointment.

 

There’s been more weakness seen in the Pound today with the currency dropping to fresh 3-month lows against the US dollar as political uncertainty continues to weigh heavy. Theresa May met the 1922 committee just before lunchtime and while she stopped short of naming her departure date from number 10 she promised to set a timetable for it after the next Brexit vote in the first week of June. As far as currency traders are concerned, the removal of May would be negative for the pound as her replacement would likely be more hardline on Brexit and increase the risk of a no-deal outcome.    

 

Our latest Cryptocurrency outlook focuses on Bitcoin and whether the market is a hedge for turbulent times.

 

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