Europe
A good set of European earnings results sent stocks in Europe back towards all-time highs on Tuesday, sustained by ECB bond-buying and the lingering effects of the unexpected stimulus announced by China on Sunday.
UK stocks were back close to records after slumping at the tail-end of last week helped by strong earnings from SKY PLC (LONDON:SKYB) and ARM Holdings (LONDON:ARM) which offset disappointment caused by weaker earnings from Associated British Foods (LONDON:ABF).
Stocks moved off their highs after German investor sentiment fell for the first time in six months amidst concern that Greece default risk is increasing. It was reported that there is an ECB proposal to increase the haircuts on securities that Greek banks use as collateral.
The weaker euro and its recent acquisition of digital advertising rival Sapient helped Publicis Groupe L (LONDON:0FQI) beat earnings expectations in the first quarter. These results setup Publicis for a better year than last, which was tainted by the failure of its merger with Omnicom Group Inc (NYSE:OMC).
Credit Suisse (SIX:CSGN) beat earnings expectations but shares fell on evidence it may have to raise capital to increase its capital cushion which has been depleted thanks to a rise in the value of the Swiss franc.
US
US markets opened strongly off the back of better than expected earnings from Verizon, DuPont (NYSE:DD) and United Technology but a slower than hoped rise in Redbook retail sales and the strong dollar cited as a negative effect on earnings by Dupont, United Technologies Corporation (NYSE:UTX) and IBM (NYSE:IBM) weighed on sentiment.
Chipotle Mexican Grill Inc (NYSE:CMG), Yum! Brands Inc (NYSE:YUM) and Yahoo! Inc (NASDAQ:YHOO) report after Tuesday’s close
FX
The US Dollar was broadly higher on Tuesday, perhaps reflecting relative weakness abroad rather than any major drivers of strength at home, given the smaller than expected monthly rise in Redbook retail sales.
Escalating concerns of Greece defaulting on one of its upcoming debt obligations sent the euro lower with a mixed German ZEW report not offering much of a counterweight. EUR/USD slipped below 1.07 while EUR/GBP fell to the bottom of its tight 0.7170 to 0.7240 range that its occupied for the last week.
The Australian dollar traded essentially unchanged on Tuesday. There was a steep sell-off on Monday leading into minutes from the Reserve Bank of Australia, which turned out to be fairly neutral. The RBA indicated a rate hike is still likely to be the next policy move, but it is awaiting more data before making the decision. The next key data point comes tomorrow in the form of Australian CPI, which is expected to show price inflation continuing to slow.
Commodities
Crude oil traded down from recent peaks as some participants stepped aside ahead of inventory data from the API today and the EIA on Wednesday that could either confirm or deny a slowdown in US oil production. Should production pickup pace again, the risk is that the US runs out of storage and any new oil produced has to be fire sold at below-market prices.
Copper continued the weak trading action from the previous session, falling back to the bottom of its April trading range of $2.70 per lb.
Gold and silver were flat on Tuesday after erasing early gains on dollar strength.
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