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From the Floor: 'New all-time highs' in Amazon, Alphabet — #SaxoStrats

   • Amazon beats on Q1 earnings, revenue, Q2 outlook better than forecast
   • Alphabet beats on both top and bottom line, Youtube and mobile ads strong
   • 'Both shares should hit new all-time highs on the news' — Garnry
   • Microsoft earnings softer versus forecasts but still strong year-over-year
   • Global tech sector likely to rally on positive earnings releases
   • WTI crude oil finding support around the $50/b level again
   • Oil finishes April on a positive note despite US inventories, Libyan production
   • EU, US yields lower as risk sentiment wanes, Trump warns of North Korean conflict
   • Market receives Thursday ECB outing as dovish as Draghi dismissed inflation risks

 By Michael McKenna

Emmanuel Macron’s victory in Sunday’s first round of the French election may have sparked a small bout of risk-on sentiment as markets breathed a sigh of relief at Front National leader Marine Le Pen’s diminishing chances of a win, but risk sentiment must still contend with any number of geopolitical threats and tensions.

As Russian ground troops prepare to move back into Syria and US president Trump warns of the potential for a “major conflict” with North Korea, gold prices have maintained a surprising degree of strength in light of the market/Europe-friendly French candidate’s first-round win.

“Today’s US GDP release is the key short-term pivot for gold,” says Saxo Bank head of commodity strategy Ole Hansen, adding that he is neutral below $1,292/oz and bearish below $1,233/oz.

In Hansen’s view, the precious metal is being supported by fading JPY selling and geopolitical risk.

'New all-time highs'

For bullishly inclined investors, the US tech sector may prove an even stronger bet than the traditional safe havens in light of Thursday’s earnings beats from Amazon and Google parent Alphabet. According to Saxo Bank head of equity strategy Peter Garnry, the sector as a whole is likely to rally in the wake of strong performances from the two e-commerce giants, as well as a Microsoft result that remains strong year-over-year if not versus expectations.

“Amazon’s Q1 earnings show that the firm is firing on all cylinders,” says Garnry, adding that he expects new all-time highs for Amazon shares in view of the company’s beating expectations on both earnings and revenue. 

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Source: Saxo Bank

Over at Alphabet, Garnry points to the fact that the company came in ahead of forecasts on both its top and bottom lines as YouTube’s continued growth, strong mobile advertisements revenue, and less spending on “moonshot projects” boost operating income.

Alphabet shares gained 5% in Thursday’s after-hours session, with Garnry stating that new all-time highs are likely at today’s New York bell.

At Microsoft, Garnry reports that while the headlines may be pointing to a top-line miss, the firm’s overall earnings were “basically in line” with expectations and represent solid year-on-year growth.

WTI finds support

Bulls may also want to take a look at crude oil, says Hansen, reporting that WTI is again finding support around the psychologically important $50/barrel level.

The end-of-month strength in crude comes despite elevated US inventories and the recent return of two major Libyan oilfields to productive status.

“This week saw both Brent and WTI crude break their 200-day moving averages to the downside,” says Hansen, “but the expected follow-through selling failed to materialise”.

Hansen says that he is bullish WTI crude below $51.60/b in the short-term.

ECB waves off inflation forecasts

Finally, markets received Thursday’s European Central Bank outing as dovish in the wake of president Mario Draghi’s dismissing inflation pressure. According to Saxo fixed income trader Michael Boye, while the ECB may not be worried about inflation at the moment, the continued procession of improved economic data points out of the Eurozone means that this is likely to change as we head further into the year.

On the day, Boye reports that both European and US yields are heading lower in light of today’s overall risk-off move.

'Clowns to the left of me, jokers to the right...'

In the broadest view, today’s markets are dealing with an investor-friendly diminishment of the populist narrative’s strength in France ahead of the May 7 second-round vote, but geopolitical flashpoints remain numerous and tensions remain high.

This morning, Zero Hedge quoted a “retired US Green Beret” as stating that “we’re at the threshold of war” while the (far) more measured editors of London’s Financial Times warn that Emmanuel Macron still faces severe hurdles in his efforts to keep France within the bounds of the post-WW2 liberal international order.

France’s Q1 GDP release also came in behind forecasts (0.3% versus 0.4% expected) as consumer spending softened and exports declined.

We’re not out of the woods just yet.

North Korea
Tanks parade through Pyongyang: Tensions between the US and North Korea are as high as they have been in living memory. Photo: Shutterstock

Michael McKenna is an editor at Saxo Bank


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