US EARLY MORNING: Equity futures are slightly better than flat and Treasuries are rallying in wake of FOMC; more labour market data due today ahead of Apple earnings after the bell; traders will also be watching ECB meeting in Europe

OVERNIGHT: Asian stocks had a mixed session after the Fed’s 25bps rate hike (some of Powell’s commentary, particularly on banks, spooked some investors). Futures were volatile due to concerns about US regional banks. NAB's earnings also contributed to ASX 200's weakness, while mining names and improved trade data cushioned losses. Chinese markets shrugged off the contraction in Caixin Manufacturing PMI and HKMA's 25bps rate hike. In Europe, it was a slightly cautious start amid a busy earnings slate, and in wake of the FOMC’s policy announcement, and ahead of today’s ECB rate decision (+25bps more likely than +50bps), while the Norges Bank is also expected to lift rates by +25bps. Regional PMI data is being released, and the outcomes have been mixed: final services and composite PMI data for France and the Eurozone was revised lower, though Germany was nudged up; there was little market reaction to the data releases. 

US PRE-MARKETS: US equity futures are slightly better than flat, while Treasuries are rallying (yields lower by 2-8bps, with the short-end benefiting the most) following the Fed rate decision (which we recap on below), and amid further jitters on the regional banking front, with PACW's shares plunging over 50% in afterhours trade; the bank has considered strategic options, including a sale, which in this environment is difficult to take as a positive, analysts said. There is a lot of jobs data today (weekly claims, Q1 unit labour costs, Challenger layoffs) that sets the stage for tomorrow's NFP data, where expectations have been raised slightly after a blowout ADP report on Wednesday (cue the traditional discussions about how the ADP's data is not a reliable indicator for the official BLS jobs report, but that hasn't stopped the likes of Goldman Sachs from revising up its NFP projections based on the ADP beat). The ECB in Europe is also set to make a policy announcement before the US open, which could result in some macro ripples; we have a preview link for the ECB meeting in our day ahead section, below. Meanwhile, on the earnings front, Tech sector giant (or it is a Consumer Staples giant, in practice? Perhaps a Consumer Cyclical? Maybe even a Communications name?) Apple (AAPL) will report its Q2 numbers after the bell today; we have a brief preview below. 

PREVIEW - APPLE EARNINGS (21:30BST/16:30EDT): Apple Inc (AAPL) is expected to report Q2 EPS of 1.43 on revenues of USD 92.96bln. According to Refintiv data, iPhone sales are seen -3.3% Y/Y at USD 48.9bln, iPad sales seen -12.5% Y/Y at USD 6.69bln, Mac revenues are seen -25.1% Y/Y at 7.82bln, while Services revenue is expected ro rise +5.5% Y/Y to 20.91bln. In terms of other areas to watch Deepwater Asset Management said there is a growing interest in the company's active installed base, which increased +8% Y/Y in the December quarter, indicating that the Apple's product flywheel is functioning effectively. Deepwater says that this expanding customer base could provide a basis for Apple to shift its investment case toward being a consumer staples company that offers higher potential returns, stating that "Apple's growing active installed base is the substance of why it's becoming a consumer staples company." Moreover, Apple is making significant strides in AI, which investors may not fully appreciate. "Expect an inline March quarter and slight guide down for June revenue," Deepwater says, "key earnings commentary includes AI impact, the India opportunity, China diversification, and financial services roadmap." 

RECAP - FED RATE DECISION: The FOMC raised rates by 25bps to 5.00-5.25%, as expected, while also hinting at a rate pause by dropping the language about anticipating more policy firming. The Fed will determine further policy firming based on tightening to date, policy lags, and other developments, Fed Chair Powell said, adding that the central bank remains committed to bringing inflation back down to target, and will take a data-dependent approach to determine further rate hikes, and there will be an ongoing assessment of whether the Fed has reached a sufficiently restrictive level. The Senior Loan Officer Opinion Survey was consistent with banks tightening lending standards and the pace of lending slowing, while the Committee has a view that inflation is not going to come down so quickly. Powell also said that they are much closer to the end than the beginning, and feels like they are close or maybe even there. Our full summary can be accessed in our US wrap here.













04 May 2023 - 09:25- Data- Source: Newsquawk

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