“Turnaround Tuesday” sees risky assets and USD bid

• Wall Street ends higher on earnings, hopes of easing US-China tensions
• Tesla misses across the board but affirms affordable model on track for H1 ‘25
• USD jumps after Bessent sees de-escalation with China
• Gold tumbles after fresh record high at $3,500

FX: USD regained some ground but printed an inside day and is still just below yesterday’s breakdown level at 99. US Treasury Secretary Bessent gave some hope in the trade war with China by saying neither side sees the status quo as sustainable. He added in a closed-door meeting that it was not the Trump administration’s goal to decouple the world’s two largest economies. Key resistance/support on the DXY is 99.57.

EUR underperformed most of its peers apart from the recent rampant CHF which sold off over 1.2%. The market tone is mixed with little new drivers, save fresh headlines about tariffs and deals. Yesterday’s top was 1.1579 and with the RSI overbought, some consolidation seems inevitable. Initial support sits just above 1.14, then 1.1274.

GBP outperformed most of the G10 currency majors after making a fresh cycle top at 1.3423. Cable had poked out of the top of this year’s bull channel after 10 straight days of buying but has now pulled back inside it. Support resides around the recent breakout level at 1.33. Comments from the BoE’s Greene highlighted the disinflationary risks posed by US tariffs.

USD/JPY fell to a new low for the move at 139.88 before it pared all its losses. Major support sits around 140. Media reports suggest the BoJ expects tariffs to slow Japan’s economy and possibly delay progress towards its inflation target. This means it will not alter its gradual rate hike path. Resistance above is around 144.33.

AUD turned back from 0.6427 again; that’s the 50% mark of the September to April drop.  The 200-day SMA is at 0.6472. PMIs will be watched for signs of the tariff impact on global growth. CAD outperformed with a narrow gain for the loonie. Much of the bad tariff news seems in the CAD price.

US stocks: The S&P 500 gained 2.51% to settle at 5,287. The tech-heavy Nasdaq finished up 2.63% at 18,276. The Dow closed 2.66% higher at 39,186. All sectors were in the green in a reversal of Monday’s moves. Financials outperformed while consumer staples underperformed though was still up 1.6%, with the focus on earnings. Tesla reported after the US closing bell. Net income slid 71% while it reported EPS of 27c, versus 41c expected. Revenues were down 9% compared with a year earlier. The EV maker withheld outlook citing tariff disruptions. The stocks was marginally higher after-market in a sign that a lot of bad news is in the stock price. 3M jumped over 8% after better-than-expected Q1 profit expectations, though it flagged a likely profit hit from tariffs.

Asian stocks: Futures are positive. APAC stocks traded mixed with most indices rangebound despite the sell-off on Stateside. The ASX 200 was little changed as strength in mining stocks and gold producers were offset by losses in tech, energy and healthcare. The Nikkei 225 struggled for direction and swung between gains and losses amid the choppy yen. The Hang Seng and Shanghai Comp followed the mixed picture for most of the session with the Hong Kong benchmark initially pressured on return from the Easter weekend. The mainland was kept afloat amid earnings and positive EV-related updates.

Gold sunk on the positive risk mood and profit taking after bullion touched $3,500 earlier in the day. The monthly RSI was at its most overbought since 1980.

Day ahead – PMIs

April flash PMIs should give us a glimpse of the first hit from President Trump’s tariff chaos. As we said in our Week Ahead, these business surveys tell us whether things are getting better or worse, and not by how much. At big turning points, the tendency is for the data to exaggerate shifts in economic activity. A key focus will be the prices index, which will point to the inflationary impact of tariffs. It has already signalled the fastest rate of input price rises in the nearly two years in the US.

Concerns over tariffs will loom large with front loading also a factor. Declines in all PMI scores in the eurozone are possible. The composite PMI figure might dip below 50, which denotes expansion or contraction. In the UK, the composite number fell to a five-month low last time. Cost and employment PMIs will be watched due to tax hikes and minimum wage thresholds taking effect.

Chart of the Day – Gold pauses for breath

Gold has been on a well-documented tear this year. In fact, the bull channel started October 2023 with a series of higher highs and higher lows – a classic ascending channel. More recently, the precious metal has broken out of this pattern to the upside, above the topside of the channel, from a wedge formation. Its safe haven characteristics have been key this month along with Fed rate cuts being priced in, with nearly four 25bps moves currently forecast by money markets. Other factors like de-dollarisation are helping, plus exchange-traded fund (ETF) holdings in gold are at their highest levels since September 2023.   Prices are very overbought on different timeframes and through the upper band of the Keltner channels. The first minor retracement level is at $3,101, while the top part of the band is around $3,244.

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