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Stocks on this side of the Atlantic Ocean are better bid these days than their American peers thanks to a combination of too-lofty valuations in the US, good corporate earnings from European companies and the expectation of looser monetary policies in Europe and the UK sooner than in the US. Plus, the AI rally – that’s been boosting the major US indices - looks like it is losing momentum.

On the central bank front, the Riksbank opted for a 25bp cut yesterday, as expected, and said that there could be two more rate cuts this year, the European Central Bank (ECB) is expected to cut its rates when it meets in June, and the Bank of England (BoE) will – maybe – give more details on its plans to lower rates at today’s MPC decision.

What’s interesting is the European and Brits’ determination to ease their monetary policies regardless of what the Federal Reserve (Fed) will do despite the risk of seeing their currencies depreciate and re-boost the domestic price pressures.

The BoE is not expected to cut its policy rate today, but the MPC is expected to agree less on when to cut rates.

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Yesterday was one of those days where we needed to fit a narrative to the market moves as the moves weren’t triggered by meaningful data or comments. Appetite in US stocks remains supported by robust earnings and Fed optimism, but the earnings expectations look somehow inflated, while the Fed optimism is fragile and data-dependent – meaning that the market could be lacking enough confidence to send these indices to fresh record highs before we have more detail on the US inflation update that is due next week. Today, investors will be closely watching the $42 billion US 10-year bond auction and listen to what the Fed’s Lisa Cook has to say.

Disney tumbled 10% after giving a weak subscriber outlook, Tesla fell nearly 4% on news that shipments from its Shanghai factory tanked 18% in April. Nvidia retreated 1.72%. Apple saw limited enthusiasm to their AI-friendly iPads.

In the FX, the US dollar rebounded on a third day as FX traders somehow shrugged off the post-FOMC optimism that was certainly overdone. The EURUSD retreated to 1.0740, the USDJPY threw itself back above the 155 level, gold remained bid above the $2300 per ounce on news that the People’s Bank of China (PBoC) continued buying gold for the 18th straight month and US oil extended losses below its 100-DMA.

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The week started on a positive note for the global equities which continue to surf on the optimism that the Federal Reserve’s (Fed) next move won’t be a rate hike, which I think is overdone and that next week’s US inflation data could be a rude awakening.

In the Middle East, tensions remain. US crude remains bid near the 100-DMA – and near oversold market conditions – as Israel refused a ceasefire deal and is preparing for a big offensive in Rafah.

In central banks, the Reserve Bank of Australia (RBA) left its policy rate unchanged today and warned that inflation is declining more slowly than expected. The USDJPY rebounds after last week’s presumed Bank of Japan (BoJ) intervention while Cable trades timidly above its own 200-DMA with the risk of seeing the recent gains melt rapidly if the Bank of England (BoE) gives a clearer sign of an approaching rate cut at this week’s meeting.

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Friday’s US jobs data brightened up the mood among Federal Reserve (Fed) doves, as both the NFP, unemployment rate and wages pointed at a slowing labour market in April. Stocks and bonds gained, while the US dollar weakened.

This week, the Reserve Bank of Australia (RBA) is expected to sound hawkish, while the Bank of England (BoE) could give a clearer road map regarding its easing plans. The divergence among central banks make the FX markets full of opportunities for investors.

In equities, last week’s dovish Fed pricing and better-than-expected earnings from Apple and Amazon helped the S&P500 eke out a 0.6% gain last week. The index closed last week right on its 50-DMA. Six of the Magnificent 7 stocks reported earnings so far and their results beat lofty market expectations. Beyond the Magnificent 7, 77% of the S&P 500 companies have reported a positive EPS surprise so far, according to FactSet. The blended year-over-year earnings growth rate for the S&P 500 printed a strong 5.0% - versus 3-4% expected by analysts.

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Sentiment is not bad for a week which confirmed that the Federal Reserve (Fed) won’t cut the interest rates anytime soon. US futures are up in the wake of better-than-expected Apple results, and ahead of today’s much-important US jobs data. The jobs data will be more important this time than in the past due to increased uncertainty regarding the future of the Fed policy. The US economy is expected to have added around 240K new nonfarm jobs in April, the average pay is expected to have grown slightly slower on a yearly basis, and the unemployment is seen steady at 3.8%. We can’t predict where the market will be headed after the data, but based on the cost of ATM puts and calls expiring today, Citigroup predicts that the S&P500 could move 1.2% up or down as a reaction to the data.

The US dollar is under selling pressure this morning, the EURUSD is drilling above a minor Fibonacci retracement with risk of seeing gains reversed after today’s US jobs report. The USDJPY continues to retreat thanks to intervention – and the speculation regarding intervention – from the Bank of Japan (BoJ) this week, while Cable tests the 200-DMA to the upside. The common denominator for what’s next is the US jobs report. A strong report could easily reverse gains in major peers, fuel the hawkish Fed expectations and back a dollar appreciation before the weekly closing bell.

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The Federal Reserve (Fed) decision yesterday was… interesting. As expected, the Fed kept its rates unchanged, said that they are not confident to cut the interest rates but announced the upcoming QT tapering. The market reaction to the decision was mixed. Stocks and yields fell, the US dollar eased and US crude slipped below $80pb.

In equities, Amazon gained more than 2%, AMD fell more than 9% as Super Micro Computer tumbled 14% as earnings missed lofty expectations. Fears regarding a slowdown in chip demand pulled Nvidia and Micron Technology down. Happily, Qualcomm rebounded 4% in the afterhours trading on solid forecast for the current period.

Cannabis stocks, which were flying high on Tuesday following the US decision to reclassify marijuana as a less dangerous drug, fell yesterday, but outlook improved on US’ latest decision to reclassify marijuana as a less dangerous drug.

Today, Apple is due to report Q1 results today due after the bell.

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Mood among investors is not cheery into the Federal Reserve’s (Fed) latest monetary policy decision due later today. And it’s understandable. The Fed must respond to three straight month jump in inflation and probably take a step back in its plans to cut the interest rates this year.

If the first few months of the year ended in tears for the Fed doves, the AI-related stocks lived up to very high expectations in the Q1. All the Maginficent 7 stocks that reported earnings so far – except from Tesla – surpassed high market expectations. Amazon posted the best beat among them, but the stock price rose less than 2% in the afterhours trading as a weak sales forecast for the current quarter tempered optimism regarding the Q1 results.

Elsewhere, Eurozone grew at the fastest pace in 18 months and exited recession in the Q1. But the EURUSD slipped to 1.0650 on broadly stronger USD, and risks are tilted to the downside at today’s FOMC announcement.

In energy, US crude cleared the 50-DMA and slipped below the $82pb level after the latest AI report posted an almost 5-mio-barrel build in US oil inventories last week and copper futures fell sharply as Fed hawk threaten the reflation trade.

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Tesla jumped 15% on Monday after Elon Musk’s surprise visit to China resulted in a partnership with Baidu’s maps and navigation features that cleared the way for Tesla’s full-self driving cars in China. The S&P500 advanced 0.32% while Nasdaq 100 gained 0.36% as the US 2-year yield remained a touch below the 5% level. The Federal Reserve (Fed) starts its two-day policy meeting today and deliver its latest policy verdict tomorrow. We are preparing to hear Jerome Powell ask for more patience and for more time to abate inflation.

Happily, the earnings season is going well. The latest stats suggest that over 80% of the S&P500 companies that have reported earnings so far beat expectations, and helped lifting expectations for Q1 and Q2 earnings across most S&P500 sectors. Amazon is due to report today.

In the FX, the USDJPY trades near 156 as traders remain in the dark regarding whether the officials intervened or not yesterday. The EURUSD tests 1.07 before EZ inflation & growth data.

Elsewhere, US crude fell below $83pb on hope of ceasefire in Gaza, and cocoa futures tanked 15% on higher margin calls and forced liquidations.

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