Yesterday was the definition of what we have been preaching all week. There are many themes playing out but none more important than earnings. The S&P 500 and Nasdaq began ripping higher into the close on news that President Trump agreed to suspend implementing tariffs on the EU, most importantly on autos, after meeting with European Commission President Juncker.
It has been a rather volatile couple of days in the financial markets. Much of the volatility has been in the stock markets where the major indices rose sharply late in the day yesterday after the EU and U.S. diffused their trade disputes, only for the optimism to be met with a heavy 20% sell-off in Facebook shares in extended hours on the back of the social network’s poorly received earnings report and forward guidance.
Yesterday was a mixed yet disappointing session with all major indices finishing well from their highs. Though the S&P 500 and Dow held green, the Nasdaq settled down 14.25 points and 1% from a new record high while the Russell 2000 lost 1.2% on the session.
The euro/U.S. dollar (EUR/USD) currency pair was on standby on Wednesday morning, as investors positioned ahead of the anticipated meeting between US President Trump and European Commission President Jean-Claude Juncker.
China’s yuan is back under pressure, as the dollar bulls returned and the People’s Bank of China seems to be shifting towards a looser monetary policy to offset the impact of U.S. trade tariffs & slowing domestic economy. The PBoC injected a record $74 billion of Medium-Term Lending Facility credit into major banks yesterday. This step comes after the central bank has already cut its reserve requirements three times in 2018, with further cuts expected in the next couple of months.