Netflix (NASDAQ:NFLX) soars 10% sending Nasdaq and S&P to fresh closing highs
The S&P 500 and the Nasdaq once more shot to fresh record closing highs overnight, mainly thanks to 10% gains from Netflix, a day after its blowout earnings. The Dow failed to join the duo, ending the day lower after consumer giants Johnson & Johnson (NYSE:JNJ) and Procter & Gamble (NYSE:PG) weighed on the index with disappointing earnings.
The S&P closed up 0.25 at 2839, the Nasdaq rallied to close 0.7% higher at 7460. Meanwhile the Dow dropped 3 points lower to finish the day at 26,210. However, this hasn’t been sufficient to ensure a positive open in Europe, which is looking mixed as we move towards the open.
Dollar slips to 3 year low
Demand for the dollar is still hard to come by and the greenback slipped to a 3-year low (below 90 versus a basket of currencies) in the Asian session overnight. The dollar is weakening ahead of the European Central Bank rate decision on Thursday as dollar bears look towards the prospect of worsening Sino-US trade relations potentially escalating into a trade row between the world’s largest two economies.
USD/JPY has been particularly hard hit by the worsening Sino-US trade relations, in addition to a slightly hawkish BoJ. The pair reached a 19-week low of 109.8, although it's seen recovering, moving towards the European open.
Eurozone PMI data & ECB policy meeting eyed
The euro continues to trade well ahead of the ECB meeting on Thursday. Strong ZEW sentiment data in the previous session, shows that economic improvement is overshadowing political troubles and strength in the euro. This shows a solid start to the year and bodes well for the PMI data due today. The ECB is likely to consider the same issue on Thursday at the ECB meeting, of whether eurozone economic strength is enough to offset the rise in the euro. With traders expecting less hawkish sounds from the ECB, a sell off in the euro could be on the cards towards the end of the day.
The EUR/USD is trading up 0.2% at $1.2325. Despite a cautious mood ahead of Thursday’s ECB announcement, a meaningful move through this level (last week’s high) could see the gates open to $1.24. Failure to hold these levels would open the door to $1.22.
GBP/USD to meaningfully break $1.40 on earnings data?
The relentless rise in GBP/USD, which has seen it jump over 3% in the past 10 days 1% since Monday, could come under pressure for the first time this week. The pound has steadily climbed on Brexit optimism hot air and today economic data could bring it back to reality with a thud. Investors will look towards UK employment data, with special attention expected to be paid to average wage growth figures.
Unemployment is forecast to remain steady at 4.3% in the three months to November. Average wage growth is expected to remain steady at 2.5% in the three months to November. The lack of growth from October’s earnings figure could be considered disappointing, especially given that inflation was at a five year high in November of 3.1%.
There is a possibility that investors will look kindly on the figures, given that inflation has started to move lower in more recent readings. However, it is also worth remembering that average wages increased sharply in October, meaning that a correction could be in store.
GBP/USD reached a fresh post Brexit referendum high of $1.4027 in the previous session, supported by strong UK data and a weakening dollar. Of note, the pair failed to close above the psychological level of $1.40; until it does so, we can expect this $1.40 to remain a key focus for trading. Today's wage data could be the deciding factor in whether this resistance will be broken, although a disappointing reading could see sterling head back towards $1.39.
Opening calls
FTSE to open 9 points lower at 7722
DAX to open 1 point higher at 13560
CAC to open unchanged at 5535