By Craig Erlam
Stock markets pushed higher again on Thursday, with the Nasdaq taking part this time after Tesla reported strong figures for the first quarter.
The doom and gloom following Netflix earnings didn’t last long in another sign of investor resilience to bouts of negativity. Of course, it came in what has been a strong start to earnings season, something Tesla on Wednesday contributed to as it shrugged off various challenges from chip shortages to Chinese lockdowns.
The Tesla numbers were very encouraging despite the incredibly challenging environment for carmakers.
Higher revenue, earnings and delivery forecasts are all music to the ears of investors, and even the long waiting lists highlight just how much demand there is for a Tesla.
Powell, Lagarde and Bailey comments
The primary focus for investors continues to be what central banks are doing and whether their efforts will bring inflation back to a more acceptable level. They’re moving at very different speeds; in the BoJ’s case, they’re effectively going in reverse. Slowly but surely, most are heading in the same direction and picking up the pace.
Commentary from policymakers has become increasingly hawkish recently, most notably in the case of the US Fed and the ECB. Both heads – Jerome Powell and Christine Lagarde – will appear at an IMF forum later Thursday, while the BoE Governor Andrew Bailey is due to speak in Washington.
Considering some of the comments we’ve had in recent days from some of the more hawkish members of the various committees, it will be interesting to see just how much those views are shared.
Oil prices are heading higher again, up more than 2%, as reports suggest the EU is nearing a framework for phasing out Russian oil imports.
Given how big a market it is for Russia, accounting for roughly half its exports, that will come as a real blow to the Kremlin.
Germany has suggested it will halve its Russian oil imports by summer and end them by the end of the year. While replacing such a massive partner won’t be easy, that does buy it time to explore alternative markets, albeit at a steep discount.
Oil is also only one major source of revenue for Russia; there’s still little talk of gas embargos which would really hurt the Kremlin.
Still, oil prices are creeping higher again, but remain pretty much in the middle of the range they’ve traded within for the last month.
Yields are creeping higher again amid a raft of hawkish commentary from central banks that appears to be paving the way for increasingly aggressive action in the month ahead.
This appears to be weighing on gold which has slipped below $1,950 after a strong rally earlier this month.
Perhaps the rally was driven by higher inflation expectations and the hawkish commentary is addressing those concerns. It’s a fine balancing act when so many are questioning whether the Fed can manufacture the soft landing it desires.
Time will tell whether this optimism will pay off.
Bitcoin is enjoying a fourth day of gains just after it survived a break of a potentially key support level.
The resilience shown to the move below $40,000 was impressive and potentially indicative of the remaining bullishness in the space, despite the uncertainty elsewhere.
Nasdaq has had a more turbulent week which bitcoin has managed to shrug off; maybe a sign of it distancing itself from the link between the performance of the two.
Whether it can sustain that we’ll see, as there’s one thing both still have in common, they’re viewed as risky assets, albeit with bitcoin very much at the higher end of the scale.
Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA
Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.