The news shaping the markets today

President Volodymyr Zelenskyy said Ukraine’s industrial Donbas region had been destroyed, with Russia’s invasion nearing the three-month mark. The US dollar index rose this morning, with traders moving to safe-haven assets.

China’s central bank lowered its five-year Loan Prime Rate by15 bps to 4.45% at its May meeting, the first cut since January. The CNY/USD forex pair traded lower after the news.

Japan’s consumer prices accelerated by 2.5% year-over-year in April, following a 1.2% rise in the previous month. The latest reading marked the eighth consecutive month of inflation, sending the JPY/USD pair lower in forex trading this morning.

New Zealand’s trade deficit widened to NZ$584 million in April, from NZ$397 million in the year-ago month, exerting pressure on the NZD/USD forex pair.

South Korea’s producer prices rose 9.2% year-over-year in April, following a 9% rise a month ago. This marked the highest producer inflation since November last year and sent the KRW/USD pair lower in forex trading this morning.

What’s happening: Shares of Ross Stores fell sharply in after-hours trading on Thursday, following the company’s earnings release.

What happened: Ross Stores reported a decline in sales for the first quarter and missed earnings expectations due to surging inflation.

Citing highly uncertain macroeconomic and geopolitical conditions, the company reduced its guidance for the year.

How were the results: The Dublin, California-based company reported a decline in revenues for the first quarter, which also missed market views.

• Sales declined by 4.1% year-over-year to $4.33 billion, coming in short of the consensus estimates of $4.53 billion.
• Net earnings contracted to $338 million, from $476 million in the year-ago quarter.
• Earnings came in at 97 cents per share, missing market expectations of $1 per share.

Why it matters: Ross Stores joined other retailers releasing disappointing earnings for the first quarter, with accelerating inflation impacting consumer purchasing power and hurting profitability.

Chief Operating Officer Michael Hartshorn said the quarter had begun on a strong note but lost steam as consumers pulling back on spending amid surging inflation.

The latest results from Ross Stores came in sharp contrast with the earnings release of TJX Cos, which was among the few retailers to beat earnings expectations this week. Although TJX Cos too reported weak quarterly sales, but it managed to top earnings expectations and raised its full-year projections.

Ross Stores cited freight and labour costs as the main culprits of its earnings miss. Operating margins contracted to 10.8% in the latest quarter, from 14.2% in year-ago quarter. The company’s comparable store sales fell 7%, versus 13% growth in the year-ago quarter.

“We knew fiscal 2022 would be a difficult year to predict, especially the first half when we were facing last year’s record levels of government stimulus and significant customer pent-up demand as COVID restrictions eased. The external environment has also proven extremely challenging as the Russia-Ukraine conflict has exacerbated inflationary pressures on the consumer not seen in 40 years,” CEO Barbara Rentler said during the earnings call.

For the full year, the company projected earnings between $4.34 and $4.58 per share, short of the consensus estimate of $5 per share. The company also guided to a 2%-4% decline in full-year same store sales, versus its earlier forecast of flat to 3% growth. Management also warned of a 4%-6% contraction in its same store sales in the ongoing quarter.

How shares responded: Shares of Ross Stores tumbled 25% to $69.50 in extended trading on Thursday, following the release of quarterly results. The stock has lost around 18% year to date.

What to watch: Investors will assess the impact of rising inflation and the ongoing Russia-Ukraine war on the company’s sales.

The markets today

The British pound will be in focus today ahead of retail sales data from the country

Context: The GBP/USD forex pair climbed to a two-week high on Thursday, after recording sharp losses in the previous session.

Details: The sterling fell sharply on Wednesday, amid concerns surrounding surging inflation and a lower growth outlook. Data released recently showed UK’s inflation hitting a 40-year high, which is expected to impact the country’s economic growth ahead.

However, upbeat labour data supported the prospects of the Bank of England raising interest rates aggressively, which lent some support to the sterling.

The GBP/USD forex pair recovered sharply on Thursday, mainly due to weakness in the US dollar. The US dollar index, which measures the greenback’s performance versus a basket of major currencies, fell more than 1% to close at 102.72.

Sentiment for the pound was also supported by economic data, with the Confederation of British Industry’s order book balance expanding to 26 in May, from 14 a month ago.

In another volatile trading session, the GBP/USD climbed to its strongest level since May 5. The forex pair ended the day higher at 1.2473 on Thursday. However, London’s FTSE 100 fell 1.82% to close at 7,302.74 on Thursday, recording losses for the second straight session.

What to watch: Traders await retail sales data from the UK today, which had declined by 1.4% in March and is expected to decline by another 0.2% in April.

Other Markets: US indices closed lower on Thursday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 0.75%, 0.58% and 0.44%, respectively.

Support & resistances for today

Market snapshot

What else to watch today

Germany’s producer price inflation, Turkey’s consumer confidence indicator, government debt and foreign exchange reserves, Italy’s construction output, India’s value of deposits, foreign exchange reserves and value of loans, Eurozone’s consumer confidence indicator, Brazil’s federal tax revenues, US Baker Hughes total rigs, as well as Argentina’s leading economic index.

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