US Q1 economic growth and job reports are in focus

Thursday's European open looks set to be a positive one after Tech companies' Q1 numbers didn't turn out quite as bad as expected. After hours, the shares rose in what appeared to be a relief rally. In addition, Asian markets have increased on Chinese policymakers' promises to offer further financial support.

In general, April has been a disappointing month for stock markets, but it has been particularly troubling for US shares. Yesterday, the Nasdaq 100 hit one-year lows but managed to finish more or less unchanged.

The widened divergence between BoJ and Fed

On Thursday, the dollar soared to two-decade highs against the yen after the Bank of Japan (BOJ) offered to buy endless amounts of bonds every session if needed.

The Bank of Japan kept the monetary policy unchanged this morning. It announced, somewhat surprisingly, that it expects short-term and long-term policy rates to remain at present or lower levels. In contrast to the Fed, the Bank of Japan has signalled it has no intention of tightening its monetary policy for the time being. Although the yen has been weakening this year, the Bank of Japan seems relaxed about possible further declines. 

As part of its 10-year yield-target protection, the BOJ said it would also buy fixed-rate bonds every day. This decision can pave the way for the yen to move through the 130.00 level against the dollar and push it even higher towards 135.00, the high back in January 2002.

While the BoJ keeps yields near zero, markets expect the Fed to hike rates by 50 bps in May, June and July. This will enable them to eventually reach 3.0% by the end of the year. Yields on 10-year notes have climbed 48 bps this month alone to 2.83%. As a result, the dollar index has reached a five-year high of 103.470, and a push above 103.82 would bring it to levels not seen since late 2002.

Events of today

Investors will get their first glimpse of the US economy's performance in Q1 today with the First Quarter US Economic Report release. The initial jobless claims report is also closely watched.

In March, US Q4 GDP was revised down from 7.2% to 7.1%. Lower consumer spending and fewer exports contributed to the downgrade. However, it was still a positive end to the year, though today's first estimate will likely show a slowdown. Q1 GDP growth is expected to continue rising by 7.3%. 

Jobless claims are expected to decrease by 4k to 180k, while continuing claims seem to fall below 1.4m.