Trump trade/Fed headlines boost US assets

• Stock rebound continues, though indices closed off early highs
• Media reports say Trump may exempt carmakers from some US tariffs
• USD finds a bid for a second straight day after 3-year lows
• Gold tumbles again below $3,300 as tensions ease

FX: USD saw broad-based strength against its major peers. Encouraging comments from Treasury Secretary Bessent who noted the tariff standoff with China is unsustainable and expects the situation to de-escalate helped the dollar. President Trump said ‘they are going to be very nice with China’ and that the tariff on China will not be anywhere near the 145% level. He also played down the idea that he will fire Fed Chair Powell. PMIs were mixed with manufacturing beating estimates but services missing. The index closed just above the key level of 99.57.

EUR fell quite sharply again, close to 1.13. The PMIs were mixed with the composite staying just in expansion territory at 50.1 from 50.9. That was it lowest level in four months. However, German and French data weakened with both below the 50-threashold and on course for another quarter of contraction.

GBP also dropped relatively sharply for a second day with disappointing PMIs. Services PMI data in April fell short of expectations, amid its sharpest fall in new export orders since May 2020.

USD/JPY jumped for a second straight session but remained below 144. Havens took the brunt of the selling as the risk mood brightened and yields rose in line with the dollar. Frist major resistance sits at 144.33.

AUD turned back from 0.6427 for a third day and closed near its lows. PMIs were all slightly softer. CAD popped higher as the greenback strengthened. Near-term resistance sits at 1.3944.

US stocks: The S&P 500 gained 1.67% to settle at 5,375. The tech-dominated Nasdaq finished up 2.28% at 18,693. The Dow closed 1.07% higher at 39,606. Tech, consumer discretionary and communication services were the standout leaders, all rising more than 2%.  Only defensive consumer staples and energy were in the red. Tesla eventually finished up 5.37% after its results released after yesterday’s close. The figures were disappointing, but investors focused on CEO Musk saying he would spend less time working the Trump administration. The S&P 500 tested the down trendline form the record highs, but sellers stepped in. The Nasdaq pierced that line, but prices closed very marginally below. Notably, there are no trade negotiations in place between the US and China.

European stocks closed strongly higher with the Dax up 3% and Euro Stoxx 50 rising 2.86%.

Asian stocks: Futures are positive. APAC stocks rallied amid tailwinds Stateside owing to trade deal hopes and after US President Trump softened his rhetoric on Fed Chair Powell. The ASX 200 was led higher by outperformance in energy and tech, while gold miners suffered after the precious metal dropped as the risk-on mood reduced haven demand. The Nikkei 225 benefitted from initial currency weakness and briefly surged above the 35,000 level after the open before fading. The Hang Seng joined in with the broad rally but the Shanghai Composite  was contained with trade frictions still obvious and nothing agreed or even a phone call between the US and China.

Gold sold off sharply again for a second day as trade tensions eased with Bessent and Trump’s comments around China. The FOMC Chair’s job also appears to be safer with the President’s walk back on his ‘firing’ comments.  There is near-term Fib support around $3295.

Day ahead – Alphabet earnings

Google, YouTube and Android’s parent reports Q1 earnings after the closing US bell. The stock price is down around 17% this year, which lags the 8% drop in the benchmark S&P 500 index. Analyst estimates for the upcoming report forecast EPS of $2.02, on revenues of $89.1bln. Investors will zero in on the threat from AI and Chat GPT, and the advertising impact from tariffs. The latter is key, with around 75% of the group revenue generated from the advertising division. That said, these results are for the January-March period, so don’t take into account the early April developments with tariffs on/off.

It is worth noting that five of the past 10 post-earnings moves have been at least 7% of the stock price. Options markets are expecting around a +/- 5.7% move.

Chart of the Day – Can Alphabet break out of its long-term downtrend?

Goolgle’s parent has performed similarly to most of the other Mag Seven stocks this year, aside from one or two. After peaking at $208.70 in early February, prices have fallen in a long-term bear channel. The 50-day SMA (currently at $167.18) crossed down through the 200-day SMA ($174.23) on 7 April. The stock actually posted the cycle low on that day at $142.66, which was below the September 2024 bottom at $151.94. Alphabet heads into results trading on the top trendline of the channel and around the 23.6% Fib level of this year’s drop at $158.25. The next retracement level is $167.89, near the 50-day SMA.

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