US stocks pullback to prior support; GBP slides after BoE

Summary:

  • S&P500 revisits key support region

  • Tesla jumps as capital raising measures announced

  • DE30: Carmakers move higher on VW earnings

  • BoE keep rates on hold; GBP slides lower

  • Crypto: Marketwide pullback on Bitfinex allegations

 

The market reaction to the latest Fed decision could be particularly telling with stocks dropping fairly sharply after what could be described as a pretty neutral update from the US central bank. The reason why this may raise concerns is that it shows just how far the market has gone in counting on support from the Fed with comments from Governor Powell that effectively ruled out a rate cut anytime soon causing a spate of selling in equities. All US indices ended the day firmly lower but the S&P500 has found support once more around the 2914-2921 region.   On the data front this afternoon there’s been a better than expected read from the latest US factory orders release, with the data for March showing a rise of 1.9%. This is above the 1.5% expected and marks an impressive recovery from the -0.3% seen last time out - itself revised up from -0.5%.


One stock that’s enjoyed a bright start to the session is Tesla with the automaker recovering from near 2-year lows after it was announced that the firm has raised $1.5B through a convertible note and share sale. According to a filing made by Tesla, the company will sell up to $1.35B in convertible senior notes, with underwriters given the chance to buy a further $202.5M for over-allotments. The notes are due in 2024 and Tesla founder and CEO Elon Musk is committed to buying $10 million in the offering, that is 41,896 shares. While the stock of Tesla was as much as 5% higher in early trade, these gains have been pared to a sizable extent, with around half of the rally handed back.

 

The German automotive sector had a rough year, mostly on the back of trade issues among the world's biggest economies. However, it seems that the beginning of 2019 was better than markets expected. Volkswagen (VOW.DE) released earnings report for the first quarter of the year today before the opening bell and it turned out to be a positive surprise. The German carmaker generated revenue of €60 billion, 2.5% higher than analysts’ estimates, while EPS reached €7.236 against expected €6.497. What may be even more important is the fact that the company decided to uphold full-year targets. Volkswagen said that it is confident of reaching those goals even in spite of slowing global economy and rising legal costs relating to Dieselgate affair. Volkswagen leads DAX gains today, while other German carmakers, like Daimler or BMW, also move higher on the back of the sector-wide optimism.

 

There’s been some small scale selling seen in the pound in recent trade after the Bank of England announced the outcome of their latest policy decision. Some speculation that MPC member Saunders would dissent proved misplaced as the rate-setting committee voted unanimously to keep the official rate unchanged at 0.75. The accompanying statement provided little real new information as to the future path of monetary policy with increases in the growth forecasts tempered by a sizable cut to next year’s inflation forecast in what overall amounts to a fairly balanced update. The pound has edged lower since the release, but the move has been fairly subdued thus far. 1.3025 possible support

 

New York Attorney General sued Finex Inc - the company behind stablecoin Tether and Bitfinex for hiding loss of $850 million. It is said that the massive loss was covered by Tether’s cash reserves. The charge came to light last Friday.  Bitcoin sank about 6% but managed to close with 2.5 % loss, while the capitalization of cryptocurrencies dropped by about $10 billion, Tether lost 3%. It must be made clear that the stability of Tether helped the coin to become a vital part of the global cryptocurrency ecosystem and it is currently the second biggest cryptocurrency by trading volume.

 

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