Financial market research and analysis

European bourses are pointing to a stronger start on the open following a late rally on Wall Street. The Dow snapped a 5-day losing streak late in the session, as strong earnings finally overshadowed US 10-year yields getting comfortable at multiyear highs.

US 10 year yields at multiyear highs

Yields touching 3.03% sent jitters through the markets as investors fear the impact of higher corporate borrowing costs on firms, after years of artificially low rates. And these jitters aren’t budging easily despite the strong earnings season, because investors have set the bar so high following the tax cut. It’s a rarity to see a stock such as Twitter post above expected earnings and still finish 2% lower on the day.

On a positive note, Boeing shot up 4.2% after reporting earnings that blew through analyst expectations helping to lift the the Dow, which finished 59 points higher, whilst the S&P closed 0.2% up and the Nasdaq slipped 0.1% as tech stocks remained out of favour.

Facebook smashes earnings expectations despite data scandal
Facebook proved to be a bright spot, smashing earning expectations after the closing bell, with advertising revenue continuing to grow, despite the recent data scandal and privacy issues. Facebook's net income was up a massive 63% year on year and earning per share at $1.69 were 25% higher than analysts had expected. The figures showed that the recent controversy has not led users to leave the network, with Facebook actually proving to be more resilient than most were willing to give it credit for.

GBP/USD aims for $1.3950 in quiet data session
Despite the stronger US yields, the dollar has eased back from its 3 1/2 month high versus a  basket of currencies. GDP/USD is making attempts towards $1.3950, although on such a quiet economic calendar, pound traders are struggling to find reason to buy in. Traders will look ahead to tomorrow’s GDP data, which if disappointing, could be the final nail in the coffin for May rate rise optimism.

EUR/USD cautiously higher ahead of ECB decision
EUR/USD is trading marginally higher, although still below $1.22 ahead of the ECB monetary policy decision at midday. No changes are expected to policy with the rate remaining constant and bond buying at €30 billion per month. With the bond buying programme due to last until September, the weaker economic data for the bloc so far this year is casting doubt as to whether this is really an achievable objective or whether the programme will now be continued into the coming year, pushing any form of post QE rate rise well and truly into the distant future. Whilst the ECB will not change their forecasts yet, preferring more data to take any decisions, a slightly more dovish tone from Draghi could send the euro tanking.