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Quick market overview (April 22 to April 26) – state: RiskOff

Market sentiment: RiskOff – 11 days

Recap of the past week:

The ending week was full of geopolitics, marked mainly with the anticipation of Israel’s retaliation for last Sunday’s massive attack. That came on Thursday and was more of a demonstration of how deeply into Iranian territory can Israel deliver its offensive potential. Much more interesting was the development of ongoing earnings season. After rather poor outlooks from ASML and TSMC, a long-anticipated correction occurred in the tech sector. The sentiment itself didn’t change much, rather the decline in indexes (the weekly market sentiment ended in positive numbers) caught up with the previous US CPI week.

Outlook for the following week:

We are heading into a very interesting week. The peak of the earnings season is upon us. We’ll get the figures from Meta Platforms, Inc., Verizon Communications Inc., International Business Machines Corporation, AT&T Inc., Microsoft Corporation, Alphabet Inc., and others. The TECH segment, already pressured by ASML and TSMC, will primarily focus attention on MSFT, GOOG, and META. At the end of the week, we’ll receive the highly anticipated PCE index, which could potentially decrease to improve the inflation outlook, or increase – to support current theories of rising inflation. But let’s take it step by step

Monday’s going to be mainly calm, during Asia we’ll only see Chinese PBoC rates and then Consumer Confidence in Europe. The market will likely be digesting Friday’s sell-offs.

On Tuesday the PMI week of the month starts, we’ll get fresh surveys from manufacturing and services from the largest economies. A slight growth is expected in Europe and stagnation in the US. During the day, we will get earnings from SAP and Verizon Communications Inc.

On Wednesday, we can expect fresh Australian CPI, IFO in Europe, and US Durable Goods Orders for March. During the day, we will get earnings from Meta Platforms, Inc., International Business Machines Corporation, AT&T Inc., Rio Tinto Group, and The Boeing Company.

On Thursday, the main macro day of the week, we will receive the May estimates of the GfK Consumer Confidence Survey. Then in the US the crucial Core Personal Consumption Expenditures and the first estimate of US GDP for Q1. These data will provide insight into how the US economy was doing during the first quarter of 2024. Later, we’ll also get US home sales and after the close, the highly anticipated results from Microsoft Corporation and Alphabet Inc. These will confirm or refute the current thesis about the slowdown in the TECH segment.

On Friday, a day as important as Thursday, we’ll get Japanese inflation and BoJ rates first. The subsequent BoJ press conference will be very important regarding the possibility of further rate hikes. In the afternoon, the long-awaited PCE index. A drop from 2.8% to 2.6% is expected in the Core Personal Consumption Expenditures. Anything below 2.6% will likely trigger a strong market rally, whereas anything above 2.6% will likely lead to further declines.

Long-term sentiment

As shown by the moodix market sentiment indicator, the negative sentiment of RiskOff continued to dominate the financial markets. Especially on Monday, it was a major test for the markets due to Iran. From a sentiment perspective, the week didn’t end up completely disastrous, and all eyes are now on the results of MSFT/Google and the Friday PCE index. We still see a relatively weak RiskOff in the market, which does not allow us to open short positions.

Good luck! Team moodix!

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