Daily Gold News: Thursday, May 5 – Gold Price is Close to $1,900 Again

Gold Price Recap

The gold futures contract lost 0.1% on Wednesday, May 4, as it extended a short-term consolidation following the recent declines. Gold bounced after the FOMC interest rate decision announcement but then it retraced the whole advance. This morning the yellow is trading higher again, as we can see on the daily chart (the chart includes today’s intraday data):

Precious Metals Price Action

Gold is 0.9% higher this morning, as it is trading close to the $1,900 price level. What about the other precious metals? Silver is 0.1% lower, platinum is 0.7% lower and palladium is 0.3% lower. So the main precious metals’ prices are higher this morning.

Fundamentals

Yesterday’s ADP Non-Farm Employment Change release has been lower than expected at +247,000 (vs. the expected +382,000). Today we will get the Unemployment Claims release, among others. The market will be waiting for tomorrow’s monthly jobs data announcement.

The markets will continue to react to the ongoing Russia-Ukraine war news.

Where Would the Price of Gold Go Following Yesterday’s Fed Release?

We’ve compiled the data since January of 2017, a 62-month-long period of time that contains of forty three FOMC releases. The first chart shows price paths 5 days before and 10 days after the FOMC release. The latest FOMC Statement release came out on March 16. Gold price was 1.6% higher 10 days after the release.

The following chart shows average gold price path before and after the FOMC releases for the past 43 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.68% higher 10 days after the FOMC Statement announcement.

Economic News Schedule

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for the next two trading days.

Thursday, May 5

  • 7:00 a.m. U.K. – BOE Monetary Policy Report, MPC Official Bank Rate Votes, Monetary Policy Summary, Official Bank Rate
  • 7:30 a.m. U.S. – Challenger Job Cuts y/y
  • 8:30 a.m. U.S. – Unemployment Claims, Preliminary Nonfarm Productivity q/q, Preliminary Unit Labor Costs q/q
  • 9:30 p.m. Australia – RBA Monetary Policy Statement
  • All Day – OPEC-JMMC Meetings

Friday, May 6

  • 8:30 a.m. U.S. – Non-Farm Employment Change, Unemployment Rate, Average Hourly Earnings m/m
  • 8:30 a.m. Canada – Employment Change, Unemployment Rate
  • 9:15 a.m. U.S. – FOMC Member Williams Speech
  • 3:00 p.m. U.S. – Consumer Credit m/m

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Trading Strategist
Sunshine Profits: Analysis. Care. Profits.

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Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor.

By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Stocks, Oil, Gold and Forex Analysis: After Netflix Debacle, US Equities Traded Flat Overnight

Global Macro and Stock Markets Analysis

The beige book release was non-alarmist, cushioning some extreme growth fears. Still, no one is willing to call an all-clear, despite signs that investors are acclimatizing to the constant headline discomfort as a bid returns to the US bond markets. Softer bond yields typically provide buoyancy to stocks.

Oil prices are still lower, a soothing balm for EU stocks. Europe traded extraordinary strong with Tech, Banks, and Industrials outperforming, while Resources Energy lagged on the pullback in metals ad oil.

The narrative for retail investors to sell ahead of Tax Day (April 18) has played to perfection. Retail investors were net sellers April 4-13 before turning small to buy over the past two days.

It was not surprising to see the reversal in equity markets on Tuesday as investors followed that playbook. While the relief rally was expected, the magnitude was not. Nevertheless, it is too early to call for a shift in retail sentiment.

Oil Fundamental Analysis

Concern about the demand implications of the Chinese response to an ongoing surge in covid infections and the anticipated impact of a globally coordinated 240Mb SPR release continue to tame any oil market rally.

Oil is still trading mixed after Tuesday’s sharp pullback but is opening in Asia near the midpoint of yesterday’s trading range – the US inventory draws lean helpful. Still, there is not much incremental news overnight, with a trajectory from here really hinging on whether other nations join the UK/US in banning Russian oil imports.

IMF forecasts are no more accurate than those of other economists and may be less accurate. But this is all part and parcel of an ongoing chorus of concerns about growth. The market now thinks growth risks are higher than inflation risks, and central banks are tightening; hence oil is struggling as growth concerns shift higher and some overextended inflation hedges unwind.

Gold Fundamental Analysis

Gold unsurprisingly is off overnight night lows as nothing has changed on the Ukraine war front.

While it is still too early to say this was a “healthy” clear-out and a fantastic opportunity to buy the dip, dip buyers can take a high degree of comfort at US 10 years slipped, dragging the dollar lower for the ride and supporting gold.

With Gold traders eying the May 9 Victory Day holiday in Russia, the Gold market stays bid. Many are expecting a significant surge in the conflict around this time – there’s increasing pressure on Russia to turn the tide in the war around this important holiday. We should expect more sanctions to be announced by Allies in the coming days, which should be favourable for gold via the supply chain and inflation channels.

FOREX Fundamental Analysis

Japanese Yen

Much of the FX market attention is focused on today’s (MoF) Suzuki – Yellen meeting, where “currency coordination” will be on the agenda. But I am skeptical that anything like a coordinated intervention to occur as the US does not necessarily mind a strong US dollar at this point, not to mention the JPY is weak due to BoJ policy. Hence any sort of FX intervention – verbal or otherwise – is unlikely to be effective unless and until the BoJ gives up on YCC.

But the fact that Yellen and Suzuki are having these discussions suggests that where there is smoke, there’s fire.

The BoJ has become the critical driver of the yen, not the FED. Either JGB yields will have to go up, or the JPY stays weak: Japan cannot have its cake and eat it.

Hence to ward off a domestic purchasing power crunch, there is a 50 % chance this upcoming BoJ meeting could address the ongoing JPY depreciation.

And while I think it will be a keen topic of discussion, I do believe the BoJ will wait until after the June FOMC to start reducing the target maturity on its YCC.

For a look at all of today’s economic events, check out our economic calendar.

Temporary Calm in the Stock Markets After Russia’s Semi-invasion

Asian markets are relatively steady after the major US stock indices dropped into negative territory, with the S&P 500 closing in official “correction” territory for the first time in two years. That means it is 10% lower than its record closing high from early in January.

S&P 500 Daily chart

European bourses and US futures are in the green as the market adopts a kind of buy-the-rumour, sell-the-fact on Russia’s so-called “peacekeeping exercise”.

STOXX Daily chart

It’s obviously tough to predict what happens on the geopolitical front with the atmosphere highly fragile.

With the tiering of sanctions well-flagged, dip buying in some risky assets is taking place with the landscape more mixed for commodity markets. Ukraine tensions are exacerbating supply risks for the global markets with major uncertainty over Russian supplies in the coming months.

It seems that measures and sanctions by the West will likely strike a balance between hitting Russia hard, but not so hard as to trigger aggressive Russian countermeasures. There is a big difference between sanctions aimed at financial systems and those that target oil and gas suppliers.

Dollar relatively subdued

The greenback has traded uneventfully over the last few sessions with the benchmark DXY continuing to oscillate around the 50-day simple moving average near to 96.

DXY Daily chart

The data calendar has been light this week but hots up with the core PCE inflation data out on Friday. Clearly, investors will still prefer the liquidity and energy independence of the world’s major reserve currency while nerves remain frayed.

Events in Ukraine have impacted on Fed rate hike expectations with markets knocking off around 10bps of monetary policy tightening this year. But these are expected to bounce back swiftly, with the well watched US 10-year Treasury yield moving back close to 2%.

Hawkish hike by the RBNZ

Amid all the geopolitical tensions, the RBNZ hiked rates as forecast by 25bps to 1%.

Importantly, it said the cash rate is expected to peak at a higher rate (3.25%) than assumed in its November statement (2.5%), which was higher than many analysts had estimated.

Rates are now forecast to rise to 2.5% over the next 12 months. The committee also affirmed it was willing to move in larger increments if required over the coming quarters. Governor Orr repeated this later, saying rates do need to rise significantly and cannot rule out 50bp hikes.

The kiwi liked what it saw from the RBNZ and has continued to build on its impressive outperformance over the last week, even though geopolitical issues would ordinarily slow upside in pro-growth currencies.

NZD/USD bottomed out at 0.6529 in late January and the kiwi has pushed above trendline resistance and the 50-day SMA around 0.6720/26 this week. Upside targets include 0.68 and the 100-day SMA at 0.6854. Support is the December low around 0.67 if external factors impact more heavily on risk sentiment.

NZD/USD Daily chart

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Cautious Ahead Of Russia-Ukraine Tensions And Fed Meeting

Global equity markets were flung on a chaotic rollercoaster ride as investors grappled with Fed hike fears and mounting geopolitical tensions over Ukraine. In the currency space, king dollar edged higher despite the slight retreat in Treasury yields while gold glittered amid the risk aversion.

European markets are catching up on the strong US close this morning, but the caution in Asia has cast a cloud over sentiment as investors would prefer to shrug off the intense volatility that rattled global markets on Monday.

Although Wall Street swung back toward positive territory yesterday as investors exploited the selloff to snatch discounted shares, US equity bulls are certainly not out of the woods. Should inflation concerns, Fed hike fears, and geopolitical tensions fuel risk aversion in the days ahead, this could spell trouble for risk assets across the globe.

Overnight, Australia’s inflation jumped to 3.5% in the fourth quarter of 2021 amid rising petrol and housing costs.  The Australian dollar pushed higher during early trading as expectations rose over the RBA adopting a more hawkish tone at its next monetary policy meeting on February 1. Traders are currently pricing in a 58% chance of a rate hike by May 2022, with June fully discounted.

Spotlight swings on Fed meeting

Although monetary policy is widely expected to remain unchanged, the FOMC meeting could provide some key insight into how aggressive the Fed intends to tighten policy throughout 2022. Markets expect the central bank to signal on Wednesday that it plans to hike interest rates in March, with a total of four 25 basis point interest rates increases expected by the end of this year. While the Fed may stick to the script, any hesitancy on future rate increases or a more dovish tone could breathe life back into riskier assets. Alternatively, a hawkish Fed may deal another blow to stock markets, injecting equities bears with fresh confidence.

Commodity spotlight – Gold

Gold kicked off the week on a firm note as geopolitical tensions accelerated the flight to safety.

The slight retreat in Treasury yields also helped zero-yielding gold, as prices ventured towards the $1845 resistance level. There is no doubt that this will be a big week for gold with its near-term outlook likely to be influenced by the Fed meeting.

A hawkish Fed that signals multiple rate hikes could dampen the appetite for gold, resulting in prices sinking back towards $1831 and $1810. If the Fed surprises markets by deviating from the script and shows hesitancy in future rate hikes, this may push the precious metal higher towards $1870.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Markets Wary Of Oil And Bond Yield Highs, As Focus Shifts To Corporate Earnings

Asian shares were a mixed bag on Tuesday due to the absence of cues from Wall Street following a national holiday in the United States. But European and U.S. equity futures are flashing red amid a jump in Treasury yields, as investors brace for the Federal Reserve to raise interest rates four times this year to tame inflation.

Brent crude ventured to its highest level since 2014 due to geopolitical tensions in the Middle East, while gold struggled for direction above $1810. In the currency arena, king dollar pushed higher while the yen weakened this morning after the Bank of Japan concluded a two-day policy meeting with no major changes.

This will certainly be a big week for financial markets as investors juggle the various themes influencing global sentiment. Equity markets will look to company results for some direction as the fourth-quarter earnings season gets into full swing. Reports from the US banks who have so far reported paint a mixed picture with JP Morgan Chase, a financial bellwether, closing down more than six per cent on Friday after the bank said rising costs would curtail profits in 2022 even as it posted record full-year earnings. Heavyweights such as Goldman Sachs and Bank of America, as well as Netflix among many others will be under the spotlight this week.

The burning question on the minds of investors could be what impact rising inflation and the emergence of the Omicron variant will have on final quarter earnings. Should we witness another mixed or disappointing week of results, this could sap more confidence from stock market bulls, especially when considering that the broader S&P500 index is already down over 2% so far this year.

A wild week ahead for the Pound?

The British pound could be injected with volatility this week due to the series of key economic reports and potential political drama at Westminster.

Market expectations already remain elevated over the Bank of England raising interest rates next month, with traders pricing in around an 91% chance of a 25bp rate hike. The argument for higher rates may be reinforced this week if the pending data meets or exceeds forecasts.

On the political front, Prime Minister Boris Johnson remains under pressure to resign over ‘partygate’. Given how it has been reported that as many as 30 letters of no confidence in Boris Johnson have been submitted by Tory MPs, things are bound to get heated. A total of 54 letters of no confidence would have to be submitted to Sir Graham Brady, chairman of the 1922 Committee of backbench MPs, for a vote to be held.

Looking at the technical picture, GBPUSD remains bullish on the daily charts. However, there seems to be resistance around the 200-day Simple Moving Average at 1.3734. A decline towards 1.3600 could be on the cards after such a strong run since the December lows, before bulls snatch back momentum for a push towards 1.3700 and 1.3830.

Commodity spotlight – Oil

Brent crude marched into Tuesday’s session, with prices climbing to fresh seven-year highs as geopolitical tensions bubbled in the Middle East. Iran-backed Yemini fighters claimed to have launched drone strikes on the United Arab Emirates, the third-biggest OPEC producer. Brent is up almost 2% this week and has appreciated close to 13% since the start of 2022. Prices are above $87.70 this morning, with bulls eyeing $88 and $90 as upside targets.

Commodity spotlight – Gold

Gold could be flung into the firing line this week if the dollar regains its mojo and Treasury yields rally. The precious metal has displayed resilience in recent sessions and even took advantage of a softer dollar to push back above $1810.

However, given gold’s zero-yielding nature, the path ahead could be bumpy and perilous for the precious metal as interest rate rises become a reality. Although other factors such as inflation risks and Omicron uncertainty may support gold bugs, the pressure is piling up on gold.

Looking at the technical picture, prices remain within a choppy range. A breakdown below $1810 could open the doors towards $1800, 1786, and $1770. Should $1810 prove to be reliable support, bulls may eye $1831 and $1845.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Week In Review: Fed Hawks, Markets Stumble, Mixed NFP

Investors marched into the new year with a renewed sense of confidence as concerns over the Omicron variant eased. European shares hit a record high in the first session after Christmas and Wall Street followed their lead, extending a solid start to 2022.

We expected this to be an eventful week for global markets due to the OPEC+ output decision, FOMC meeting minutes, and key US jobs data. Equity bulls remained in the driving seat on Tuesday, elevating equities across the globe higher as markets players become hopeful over a steady economic recovery despite a surge in Covid-19 cases.

In the currency markets, king dollar flexed its muscles across the G10 while gold rebounded from the $1800 psychological level. On the data front, China’s December Caixin Manufacturing PMI came in at 50.9 vs 50 returning to growth while the U.S services industry activity slowed more than expected in December.

Let’s not forget the OPEC+ meeting on Tuesday which concluded with the cartel sticking with their planned production increase for February. OPEC expressed optimism over the global economic outlook and expected strong demand despite surging Coronavirus cases. WTI and Brent crude are both up roughly 5% year-to-date.

Before things got spicy on Wednesday evening, the ADP Employment Report revealed that private sector employment surged by 807,000 in December. This figure smashed market forecasts and was a big jump from the 505,000 witnessed in November. Even though the ADP data is a poor predictor of the key non-farm payrolls report on Friday, markets may be readying themselves for a potential upbeat number.

We also published our mid-week technical outlook focusing on trends. The monetary policy divergence between the Fed and ECB are likely to influence the EURUSD’s trajectory this year. Using technical analysis, prices remain bearish on the monthly and weekly timeframe. However, niseem to be making a move on the daily charts with 1.1370 acting as a point of interest.

US equity bulls were frightened by Fed hawks on Wednesday after the minutes from the December meeting pointed to a faster than expected hike in interest rates. Global stocks limped into Thursday’s session struggling to nurse the deep wounds inflicted by the hawkish signals from the FOMC minutes and spread of the Omicron variant.

After all the anticipation, the US jobs report was finally released on Friday afternoon. In December, the US economy created 199,000 jobs which were far below the 400,000 expectations. Although the NFP numbers were disappointing, the US unemployment rate fell to 3.9% from 4.2% in November while hourly earnings jumped 4.7% versus the expected 4.2%. These bright spots may strengthen bets over the Federal Reserve raising interest rates. In fact, traders are currently pricing in an 86% probability of at least one rate hike by mid-March 2022.

The S&P500 extended losses following the NFP report, concluding the week 1.87% lower. Interestingly, the dollar weakened across the G10 arena while gold staged a rebound that failed to push prices back above the $1800 psychological level.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

2021: A Year Defined by Soaring Inflation, Covid Variants & Market Resilience

After an extremely chaotic 2020, the world pinned hopes on stability and normality returning this year.

Indeed, 2021 kicked off on a positive note as the mass vaccinations against Covid-19 and confirmation of Joe Biden’s victory in the presidential election boosted investor confidence.

Renewed stimulus hopes from Biden’s $1.9 trillion economic rescue plan fuelled the risk-on mood, propelling US stocks to record highs during the first month of 2021. Console retailer GameStop also hijacked the headlines by surging over 1600% in January as a group of investors on Reddit fuelled a short squeeze in the company’s shares.

In February, a sense of caution enveloped global markets as investors mulled over the possibility of rising inflation becoming a major theme. Signs of inflation were already spotted across the globe amid supply-chain disruptions, while prices pressures were expected to return amid an economic boom powered by vaccines and pent-up consumer demand. Taking a look at commodities, gold tumbled to an 8-month low under $1720 thanks to rising yields, dollar strength, and growing global risk appetite.

Things started getting sticky in March as coronavirus variants appeared across the globe. In the United Kingdom, the B.1.1.7 strain was initially considered more lethal than earlier variants. Different variants of the novel coronavirus were also reported in Brazil and even India which saw a spike in cases despite vaccine rollouts. On the currency front, the dollar appreciated against almost every single G10 currency as investors speculated that the massive fiscal stimulus and aggressive vaccinations would help the US economy recover.

Q2 kicked off on a positive note despite global economic uncertainty caused by the ongoing pandemic. Equity bulls remained in the driving seat amid robust Q1 earnings, the Fed’s pledge to keep rates lower for longer, and China’s eye-popping 18.3% growth in the first quarter.

In other news, Coinbase made its debut on Nasdaq on April 14th which was seen as a watershed moment for the cryptocurrency industry.

Everyone was talking about copper in May as the commodity surged to a record high of $4.9. The rally was triggered by the reopening of major economies and the robust demand for minerals needed for the green energy agenda. Given how copper is used in everything from electric vehicles to home appliances like washing machines, the outlook was heavily bullish – especially amid the bigger global focus on green energy. The commodities boom, fuelled by rising global demand and supply shortages fuelled fears around inflation across the globe.

In the United Kingdom, the Delta variant of Covid-19 clouded economic recovery hopes in June. As the third wave of Covid-19 cast doubt on more lockdown easing before July, the British Pound tumbled against every single G10 currency, sinking as low as 1.3790 against the dollar.

It was not only the UK affected by the Delta variant, it swept across Europe and started gaining ground in the United States. Hotspots were also found in Asia and Africa.

A sense of unease gripped markets in July as Covid-19 cases across the globe surged. The International Monetary Fund (IMF) warned that unequal access to Covid vaccines risked derailing the global recovery. Global stocks displayed resilience despite the Delta variant fuelling the surge in coronavirus cases worldwide. Infact, the S&P500 concluded the month of July almost 2% higher despite the growing uncertainty. Down under, the Australian dollar collapsed like a house of cards due to a surge in virus infections and lockdown restrictions in Australia.

Hong Kong stocks stole the spotlight in August as the tech-heavy Hang-Seng Index briefly tumbled into bear market territory, dropping more than 20% from its mid-February peak. The descent was driven by China’s regulatory crackdown on sectors ranging from financial technology to education and gaming.

Risk-off was the name of the game during the final month of Q3 thanks to inflation fears, growth concerns, and mounting uncertainty over Covid-19. As inflation made itself at home in the United States, Federal Reserve policymakers were forced to accept that inflation proved to be larger and more long-lasting than expected. The terrible combination of growth doubts, turmoil surrounding China’s Evergrande and Fed taper fears saw the S&P500 fall 4.8% in September.

Oil prices exploded higher in October, with WTI rising beyond $80 for the first time since 2014 as surging natural gas prices spurred greater demand for crude ahead of winter.

Tight global supply and robust fuel demand in the United States and beyond energized oil bulls. WTI concluded the first month of Q4 roughly 10% higher while Brent was not too far behind gaining 6%. Interestingly, the IMF and World Bank both issued warnings over rising inflation.

After “talking about talking about” tapering for many months, the Federal Reserve finally made a move in November.

This marked a crucial turning point as it stepped away from its emergency policy. In a process known as tapering, the Fed was set to reduce $120 billion in monthly purchases of Treasuries and mortgage-backed securities. The mighty dollar appreciated across the board, boosted by increased expectations for a reduction in the Fed’s asset purchase and interest rate hike, possibly in late 2022. During this month, the World Health Organization (WHO) also declared a new coronavirus variant to be “of concern” and named it Omicron. It was first reported to the WHO from South Africa on 24 November.

Growing uncertainty over the Omicron variant weighed heavily on market sentiment in December. With the new variant in town spreading faster than the more prevalent Delta, this clouded the global growth outlook as countries across the globe announced tighter restrictions.

The end of 2021 saw major central banks turning hawkish in the face of rising inflation.

As one of the largest central banks in the world embarked on the path to policy normalization, other banks wasted no time to tighten. We saw the Reserve Bank of New Zealand (RBNZ) raise interest rates in November, the Fed doubling down on its stimulus taper in December, and the Bank of England (BoE) also surprising markets by hiking rates. Indeed, with US inflation skyrocketing 6.8% in the year through November and consumer prices soaring across the globe, this offers a taster of what to expect in 2022.

One key thing to keep in mind is that the S&P500 closed at record highs 69 times this year despite the global growth fears and covid related uncertainty.

US equity bulls were certainly in the driving seat throughout 2021 with the S&P500 up over 27% year-to-date, marking its third straight annual increase.

There is no doubt that 2021 was a historic year defined by runaway inflation, coronavirus variants, and resilient stock markets.

With persistent inflation likely to remain a major theme in 2022, it will be interesting to see whether this forces more central banks to tighten monetary policy. Let’s not forget about the current Omicron menace and risks of new variants potentially clouding the global economic outlook. Equity bulls dominated the scene this year but will we see the same in 2022? Or will the combination of rising inflation and tighter monetary policy end the bull run?

We saw some extreme events throughout 2021 with the show set to continue in 2022. It may be wise to fasten your seatbelts in preparation for another eventful and potentially volatile year for financial markets as 2021 slowly comes to an end.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Caution Prevails as Investors Eye Omicron and Fed Meeting

The dollar held its ground despite US Treasury yields slipping in the previous session, while gold prices remained range bound, waiting for a fresh directional catalyst.

European equity futures are mixed this morning with investors clearly on edge ahead of a week dominated by central bank decisions and key economic reports. Any decisions made on monetary policies will set the tone for the rest of 2021 while heavily impacting risk markets.

With the Bank of England, Bank of Japan, European Central Bank, and Swiss National Bank all expected to keep monetary policy unchanged, all eyes will be on the FOMC meeting on Wednesday. Expectations remain elevated over the Fed announcing a faster pace of tapering in the face of rising inflation and using more hawkish language than has been seen in previous statements. If this does become reality, it could weigh on stock markets while boosting the dollar.

Investors eye Fed decision

The Federal Reserve’s December policy meeting remains the main event for markets this week. With US inflation surging to its highest level in nearly 40 years, equity markets still volatile and the Omicron variant fueling economic uncertainty, it will be interesting to see what policymakers at the Fed have to say.

Back in November, the FOMC made an official announcement on tapering. Fast-forward to today and the central bank is set to announce an acceleration of tapering from January 2022, with consensus expecting the pace to double in speed, in order to counter inflation. This has boosted expectations over the Fed hiking interest rates sooner than expected with traders currently pricing in a 73% probability of at least one rate hike by early May 2022 and fully pricing a 25-basis point hike by mid-June 2022.

Much attention will be directed towards the Fed’s new dot plot and updated economic forecasts. Back in September, policymakers were forecasting one rate hike in 2022, followed by three in 2023 and another three in 2024. The new dot plot is expected to show the majority of Fed members now expect two rate hikes in 2022.

Currency spotlight – AUDUSD

The Australian dollar stumbled into Tuesday’s session under pressure as virus cases surged in the country’s most populous state. Daily Covid-19 infections jumped to their highest level in more than two months, fueling concerns over the economic outlook. However, there was some good news as reports showed that business confidence remained well above its long-term average, despite dropping sharply to 12 in November from a downwardly revised 20 in October.

Taking a look at the technical picture, the AUDUSD remains under pressure on the daily charts. Sustained weakness below 0.7180 could encourage a decline towards 0.7080 and 0.7000, respectively.

Commodity spotlight – Gold

Gold could enter the holiday season with a bang due to key central bank meetings, economic data and developments revolving around the Omicron variant. Prices have been trapped within a range over the past few weeks with bulls and bears waiting for a fresh directional catalyst.

This may come in the form of the Federal Reserve meeting or other economic events that could impact risk sentiment. Should the Fed step up the gear on tapering, this is likely to punish gold prices as the dollar appreciates, yields rise and rate hike expectations jump. In the meantime, support can be found at $1765 and resistance around the psychological $1800 level.

By Lukman Otunuga Senior Research Analyst

Disclaimer: The content in this article comprises personal opinions and should not be construed as containing personal and/or other investment advice and/or an offer of and/or solicitation for any transactions in financial instruments and/or a guarantee and/or prediction of future performance. ForexTime (FXTM), its affiliates, agents, directors, officers or employees do not guarantee the accuracy, validity, timeliness or completeness, of any information or data made available and assume no liability as to any loss arising from any investment based on the same.

Deleveraging COVID Bubble – Possible Volatility Risks In Foreign Markets

I get asked all the time what my opinions are regarding the markets. As much as I could go into really deep details regarding technical analysis and other factors of my research, the simple answer is that we’ve been living through 2~4+ years of incredible market trends and unprecedented global central bank efforts to support and contain market risks. This is something we have not seen at these levels since the end of WWII and after the Great Depression.

Is there a Speculative Bubble Deleveraging Risk In The Global Markets?

The one thing that keeps popping up in my mind is the deleveraging of credit/debt and speculative risk assets over the next 2 to 3+ years. Let me explain what I mean by this statement.

Before the first COVID event (February 2020), the global markets were already within a moderate strengthening phase with relatively stable global trade, economic, and central bank participation. Everyone was still waiting for inflation to rise while employment and economic data continued to strengthen. When COVID hit, things changed very quickly.

  • Global lockdowns disrupted the labor and supply markets.
  • Consumers shifted gears while settling (or moving) into more rural locations attempting to wait out the new COVID threat.
  • Global central banks and governments attempted to navigate the catastrophic COVID event while settling population and finance issues.
  • An unprecedented amount of stimulus, global central bank financing, and speculative capital was unleashed over a very short 3 to 4-year span of time.
  • The success of the global economy prior to 2020 prompted a very deep and efficient speculative market trend in 2020 and beyond.
  • Now, that speculative bubble appears to be bursting – at least in certain areas of the markets.

Let’s explore a bit of data and charts.

This first Monthly chart highlights trends in various global market indexes. ARKK, the ARK Innovation Fund, HSI, the Hang Seng Index, DAX, the DAX Index, SPY, the S&P 500 ETF, and HXC, the Golden Dragon China Index. Each of these represents a unique component of global markets and sectors.

ARKK represents technology, innovation, and a more broad global investment style focused on stronger or more highly volatile price trends.

HSI represents a broad market China Index that includes various markets sectors – including Technology, Medical, Consumer, Real Estate, Finance, and others. These companies are listed in China and do a majority of their business in China.

DAX represents a broad market German Index.

SPY represents a broad market US Index

HXC represents the US-listed Chinese Companies doing a majority of their business in China.

The purpose of showing you this chart is to highlight the deleveraging that is already taking place in ARKK, HXC, and the HSI. The DAX and the SPY are still trending higher, while the ARKK, HSI, and HXC are trending strongly to the downside.

Chart, histogram

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It is my opinion that the global markets, particularly China/Asia, are already in the midst of a massive speculative deleveraging event – a post-bubble rally phase initial collapse process. Certain technicians sometimes call this an “unwinding” or “unraveling” event. Ultimately, the US has seen two of these types of events over the past 30 years – the 1999-2000 DOT COM bubble burst and the 2008-09 Housing Market collapse.

What I found interesting is the HXC price levels have already fallen to levels near the March 2020 COVID lows. Whereas the HSI price levels have also fallen to very near the March 2020 COVID lows, it has also fallen into negative price trending from 2014-15 price levels.

Could Speculative Deleveraging Stay Localized This Time?

I think global volatility and bigger price trends will be something we need to prepare for in 2022 and 2023 – possibly even longer. Yet, my opinion is the US, and other stronger global economies may be partially immune from this speculative deleveraging event.

Why?

Because not every US corporation or citizen has put themselves in a similar scenario as I believe many in China and Asia possibly have after nearly 30+ years of extreme growth trends.

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The US has experienced the 1999-2000 DOT COM bubble and the 2008-09 Housing Market crisis over the past 30 years. At the same time, China/Asia has grown from moderate obscurity in the 1980s-1990s into extensively powerful economies. Along the way, over a relatively short period of time, a generation or two of the populous has seen assets rise thousands of percent over the past 20 years. This leads to a highly speculative investment class – almost feeling as though anything they touch turns to gold.

But it doesn’t always work out that way – does it?

This HXC chart highlights the incredible rally after the February 2020 COVID event as well as the moderate growth phase from 2005 to 2016. Notice the big growth that took place in 2017. This was a period of very strong economic growth where Chinese companies started listing on US exchanges to tap into a strong US investor class.

After COVID hit in 2020, this speculative investing trend skyrockets over 180%. Then, it collapsed.

Chart, histogram

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Bitcoin May Follow This Deleveraging Trend If Panic Sets In

The recent rally and peak in Bitcoin have also caught my interest in seeing if this deleveraging event follows through in large Cryptos? Since the initial Bitcoin collapse in early 2021, Bitcoin has rallied strongly as the US markets recovered and inflation started to rise later in 2021. Now, a very strong pullback in Bitcoin has started at the same time large Chinese Real Estate developers and other corporations are beginning to experience severe credit/debt concerns.

Is there a correlation between Chinese/Asian consumer/economic strength and Bitcoin? Has the rise in Bitcoin prices over the past since 2015 been fueled by the rising speculative and investment trends in China/Asia?

We’ll know soon enough.

Chart, histogram

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If the global markets continue this process of speculative trading deleveraging, we’re going to see an increase in volatility and deeper price trends take place before the process completes. I suspect there is a huge amount of underlying credit/debt that is struggling in certain areas of the world right now. This type of speculation tends to drive a mentality of FOMO (fear of missing out) and YOLO (you only live once). I remember after the DOT COM bubble burst, I would talk to people that were so entrenched in the bubble, and they bought all the way through the collapse – believing it would bounce back.

This deleveraging event should stay somewhat immune from certain larger market economies. Yes, there will likely be more volatility and bigger price swings. But, eventually, the strength of consumers and economic trends will settle most of this process fairly quickly for the largest global economies.

2022 and 2023 are sure to be great years for traders. Sectors will rotate and trend. The world’s strongest economies will rotate and trend. The increased volatility will create risks, but it will also create incredible opportunities for profits.

Get ready; it looks like this deleveraging event is just getting started.

Want to learn more about deleveraging and volatility risks in the markets?

Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.

If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.

For a look at all of today’s economic events, check out our economic calendar.

Have a great day!

Chris Vermeulen
Chief Market Strategist

 

Omicron Hits the Markets

A new variant of Covid-19 has emerged and the markets have responded with a sell-off. Can this variant have a bigger impact on the economy than the previous ones, or is this just a temporary glitch? In this week’s market update you will find answers to the following questions:

  • Could Omicron sell-off extend beyond Friday?
  • What OIL traders should watch for?
  • How could the FOMC policy narrative affect Gold and dollar?

Don’s miss our latest market update: Watch now!

For a look at all of today’s economic events, check out our economic calendar.

Risk Off Is Back. Indices and EM Currencies Drop. Safe Havens Surge

Shocking night and morning for the vast majority of stock bulls. Indices are collapsing and the new strain of the virus is apparently to blame.

In this situation, safe-haven assets like gold for example are gaining traction. Gold is aiming higher after breaking the neckline of a small inverse head and shoulders pattern.

Yen is also gaining, USDJPY is currently performing an attack on the mid-term up trendline.

EURJPY is testing crucial long-term horizontal support on the psychological level of 128.

USDCHF is dropping after the false breakout from the symmetric triangle pattern.

EURUSD is trying a small bullish reversal to test the major horizontal resistance.

USDMXN advances higher after the breakout of an important horizontal resistance.

EURMXN continues the rise after the price escapes from a beautiful wedge pattern. A price action classic!

For a look at all of today’s economic events, check out our economic calendar.

Can We Call the Top?

In this week’s market update you will learn:

– USD surges as inflation soars
– Markets at the top – can we predict future crash?
– What to expect in the week to come

Don’s miss our latest market update:

For a look at all of today’s economic events, check out our economic calendar.

European shares end at record high on strong earnings

By Anisha Sircar and Ambar Warrick

(Reuters) – European shares finished at a record high on Wednesday following a strong batch of quarterly earnings, while heavyweight mining stocks recovered from recent losses as commodity prices rose.

The pan-European STOXX 600 rose 0.4% to a record-high close of 481.22 points, with basic resources stocks leading gains. The sector added 0.9%, recovering from a near one-month low.

In earnings news, German software firm TeamViewer jumped 11.0% after it confirmed its preliminary third-quarter results and annual outlook.

Lufthansa jumped 7.0% after the airline posted a return to profit for the first time since the coronavirus crisis, boosted by the easing of travel restrictions.

Raiffeisen Bank International rose 10.9% after its quarterly net profit blew past estimates on strong revenues and lower provisions.

Still, anticipation of an announcement on stimulus tapering by the U.S. Federal Reserve kept most stock gains in check.

“Hopes of a reacceleration in growth, a pullback in real bond yields, and a supportive earnings season in Europe, which has come in above the historical average, are contributing to the renewed market rally,” said Milla Savova, European equity strategist at Bank of America.

Savova, however, warned the recovery will prove short lived as major central banks consider scaling back on pandemic-era stimulus.

The STOXX 600 kicked off November with consecutive record highs as investors looked past concerns about rising inflation caused by supply-chain bottlenecks and labour shortages, with earnings season proving to be much stronger than expected.

Profits for Europe Inc are expected to jump 57.2% in the third quarter to 102.3 billion euros ($118.5 billion) from the same quarter last year, new Refinitiv IBES data showed, an improvement from last week’s 52% growth forecast.

Oil stocks were major decliners on the STOXX 600, falling 3.0%, as crude prices fell after data pointed to a surge in U.S. inventories and pressure mounted on OPEC to increase supply. [O/R]

Gains in technology stocks powered France’s CAC 40 index to a record high of 6,955.100 points.

Vestas, the world’s largest maker of wind turbines, slumped 18.2% after posting a lower-than-expected third-quarter operating profit and trimming its full-year profit forecast.

BMW inched up 1.5% after the German automaker reported higher quarterly profit, but reiterated its warning on the global chip crunch.

French diagnostics specialist Biomerieux edged 0.1% higher after Bloomberg reported that it was exploring a potential merger with Germany’s Qiagen.

 

(Reporting by Anisha Sircar in Bengaluru; Editing by Sherry Jacob-Phillips, Shinjini Ganguli, William Maclean)

Miners Knock European Stocks Lower Ahead of Key Central Bank Decisions

The pan-European STOXX 600 index slipped 0.3% as of 08:13 GMT, while Asian stocks were mixed on jitters ahead of U.S. Federal Reserve and Bank of England meetings this week where the central banks could scale back pandemic-era stimulus.

Mining stocks led losses, down 2.4% on a fall in the iron ore market and lower copper prices.

The STOXX 600 closed on Monday at a record high on the back of strong earnings and a jump in bank stocks fuelled by expectations of a rate hike by the European Central Bank next year.

However, London-based Standard Chartered slumped 5.7% despite reporting a stronger-than-expected pre-tax profit for the third quarter helped by lower credit charges.

The world’s largest online betting group Flutter Entertainment dropped 6.7% after trimming its full-year outlook due to a run of unfavourable sports results and a temporary exit from the Netherlands.

In a bright spot, meal-kit delivery firm HelloFresh surged 12.6% after raising its sales forecast for 2021, helping Germany’s DAX stay afloat.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Anisha Sircar in Bengaluru; Editing by Shounak Dasgupta)

Global Stocks Fall, U.S. Dollar Climbs on Inflation Worries

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.6% in September, the Commerce Department said on Friday, signifying strong consumer confidence as COVID-19 infections fall.

But the data also showed that price pressures remained persistent in September, with the personal consumption expenditures (PCE) price index climbing 0.2%.

Investors overcame bearish sentiment that had weighed on trading following quarterly earnings from technology giants Amazon Inc and Apple Inc on Thursday that both missed Wall Street predictions owing to increased labor costs and operational disruptions that were set to hit their revenues.

“The inflation story slowly morphed into something that we thought to be transitory, and it’s turning out to be more persistent,” said Charlie Ripley, senior investment strategist at Allianz Investment Management in Minnesota.

The MSCI world equities index, which tracks shares in 50 countries, dipped 0.25% to 745.08. European stocks closed 0.07% higher at 475.51 after rebounding from losses early in the day’s session.

On Wall Street, all three major indexes closed higher after trading down for much of the day’s session, driven by technology, healthcare, and consumer discretionary stocks.

Microsoft’s shares touched a record high and neared a market capitalization of $2.5 trillion, surpassing Apple’s market cap of roughly $2.46 trillion.

The Dow Jones Industrial Average rose 0.25% to 35,819.56, the S&P 500 gained 0.19% to 4,605.38 and the Nasdaq Composite added 0.33% to 15,498.39.

“When you look at the bigger picture in equities, the price makers in an inflation environment can pass it to consumers, but price takers have to absorb those input costs, meaning lower profits,” Ripley added.

U.S. Treasury yields dipped from earlier gains, dragged down by concerns over rising consumer inflation for September that further stoked expectations of aggressive monetary policy action from the Federal Reserve to combat the surge in prices.

The benchmark U.S. 10-year yield traded down at 1.5539%.

The dollar index continued to rebound from prior-day losses on news that the Fed’s preferred inflation measure showed prices continuing to rise faster than its 2% target.

The dollar index rose 0.811%, with the euro down 1.03% to $1.1559.

U.S. crude prices settled higher, turning positive after an early decline, supported by expectations that the Organization of the Petroleum Exporting Countries, Russia and their allies, known as OPEC+, would maintain production cuts.

Brent crude rose 6 cents to settle at $84.38, while U.S. West Texas Intermediate crude rose 76 cents, or 0.9%, to $83.57.

Gold prices fell to their lowest level in more than a week on Friday, weighed down by a stronger dollar and rising U.S. inflation.[

Spot gold dropped 0.9% to $1,782.39 an ounce. U.S. gold futures fell 1.30% to $1,783.00 an ounce.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chibuike Oguh in New York; editing by Jonathan Oatis)

Global Equities, U.S. Yields Rise Despite Weak U.S. Economic Growth Data

U.S. gross domestic product increased at a 2% annualized rate last quarter, the slowest since the second quarter of 2020 when the economy was beset by COVID-19 pandemic restrictions, the Commerce Department said in its advance GDP estimate on Thursday.

The weak GDP figure was offset by continued improvement in U.S. jobless claims, which dropped 10,000 to a seasonally adjusted 281,000 last week, remaining below the 300,000 threshold for the third straight week.

“The GDP numbers are not a surprise since we’ve come off a bottom and it’s going to slow to the normal pre-COVID pace,” said Dan Genter, chief investment officer at RNC Genter Capital Management in Los Angeles. “The earnings confirm that the multiple is sustainable and it’s giving people confidence not to exit the market and even to put money in.”

The MSCI All World Stock Index was up 0.55% at 745.85 points, barely below its lifetime high of 749.16 points hit last month.

In Europe, the STOXX index of 600 companies pared back earlier losses and rose 0.24% to 475.16 after the European Central Bank left its monetary policy unchanged, as widely expected.

The yield on the U.S. 20-year bond on Thursday rose slightly above the 30-year bond yield for the first time, according to traders, a move that garners attention because of investor sensitivity to inverted yield curves that can be a harbinger of recession.

Another key yield curve showing the spread between 2-year and 10-year yields was also flatter on the day.

The benchmark U.S. 10-year yield was trading up at 1.5659%.

“With what we’re seeing with PCE run rate, there’s a feeling at some point in time the Feds are going to raise rates,” Genter added.

On Wall Street, all three major U.S. stock indexes were trading higher driven by technology, industrials, consumer discretionary and healthcare sectors.

The Dow Jones Industrial Average rose 0.49% to 35,664.41, the S&P 500 gained 0.83% to 4,589.52 and the Nasdaq Composite added 1.26% to 15,428.25.

The U.S. dollar held losses to the euro and British pound late, as currency traders digested moves in interest rate markets, comments by the ECB President Christine Lagarde and a weaker-than-expected U.S. economic report.

The dollar index of major currencies lost nearly 0.6% to 93.363, with the euro up 0.65% to $1.168.

Gold prices rose as demand for the safe-haven asset was lifted by a softer dollar and data showing the U.S. economy grew at its slowest pace in more than a year.

Spot gold rose 0.09% to $1,788.33 per ounce. U.S. gold futures settled up 0.2% at $1,802.6.

(Reporting by Chibuike Oguh in New York; Editing by Will Dunham)

Stocks Rally in Asia, China Property Sector Worries Dampen Sentiment

Europe and U.S. markets look set to keep the upward momentum as FTSE futures and E-mini futures for the S&P 500 index were up 0.06% and 0.24% respectively at 0531 GMT.

MSCI’s gauge of Asia Pacific stocks outside Japan rose 0.15% and briefly touched its highest in six weeks on Tuesday, after gaining throughout October.

The Asian regional benchmark however is down about 11% from its February high compared to the MSCI world equity index which is in sight of its record high hit six weeks ago.

“Equity prices are likely to be driven by technical positioning this week, as trade enters the final week of the month,” said Anderson Alves, an equities trader at global online trading platform ActivTrades.

Japan’s benchmark Nikkei average gained nearly 1.8%, while Australia’s S&P/ASX 200 closed 0.03% higher.

The CSI300 index inched 0.05% higher led by information technology stocks, but the Hong Kong benchmark Hang Seng Index eased 0.4%.

China property stocks extended their losses in the afternoon sessions as another developer, Modern land, defaulted on a payment, adding to worries about spiralling effects of the debt crisis at China Evergrande Group.

An index of Hong Kong-listed mainland property firms dropped 4.7% and the mainland’s CSI 300 Real Estate Index was down 2.4%.

China has said it will roll out a pilot real estate tax in some regions, adding to existing investor concerns about real estate in the mainland.

Edison Pun, Senior Market Analyst at Saxo Markets in Hong Kong noted that markets remained on a strong trend, having begun digesting the prospect that the U.S. Federal Reserve will begin tapering its monetary stimulus in November.

“However, we need to watch whether it will put on extra pressure on the Chinese property market when the property tax is rolled out. It could hurt consumption in the end if we are seeing an overall downturn in Chinese property prices,” he said.

A large proportion of S&P 500 companies are due to report results this week, including technology heavyweights Facebook, Apple Inc, Amazon, Microsoft, and Alphabet, which have been the drivers of the market rally this year.

“Of the S&P 500 firms that have reported this season, the net surprise on earnings has been 13%. So it is easy to understand the optimism percolating through risk appetite despite inflation fears,” said ANZ Research in a note.

“The economy remains very strong. We expect the recovery will re-accelerate once bottlenecks and COVID concerns subside.”

The European Central Bank and Bank of Japan are both set to hold monetary policy meetings on Thursday, although neither are expected to take major action on interest rates.

The Dow Jones Industrials and S&P 500 closed at record highs on Monday. Tesla, which jumped 12.66% and breached $1 trillion in market capitalisation, also provided the biggest boost to the S&P 500 and the Nasdaq.

Benchmark 10-year U.S. Treasury notes were steady at 1.6397% off last week’s five month top of 1.7% as uncertainty about when the Federal Reserve would raise rates to curb rising inflation weighed on market sentiment.

The dollar rose 0.1% on Tuesday, recovering from a near one-month trough hit during the previous session.

Already nudging multi-year highs, oil prices rose marginally in a market gripped by tight global supply and strengthening fuel demand in the United States and beyond.

Brent crude futures pared earlier losses to stand at$86.11 a barrel, up 0.14%, while the U.S. West Texas Intermediate (WTI) crude futures edged 0.01% higher to $83.76 a barrel.

Spot gold was down nearly 0.2% to around $1,804 per ounce.

(Reporting by Kane Wu; additional reporting by Alun John; Editing by Sam Holmes & Simon Cameron-Moore)

Dow Posts Record Closing High, Stocks Gain for 3rd Week; Dollar Dips

On the day, MSCI’s broadest gauge of global shares was flat, and the S&P 500 and Nasdaq ended lower.

Stocks came under pressure after Federal Reserve Chair Jerome Powell said the U.S. central bank was “on track” to begin reducing its purchases of assets.

Intel’s stock fell 11.7% and was among the biggest drags on the S&P 500. Late Thursday, Intel reported sales that missed expectations and pointed to shortages of chips holding back sales of its flagship processors.

American Express Co’s stock gained, boosting the Dow after the company beat profit estimates for the fourth straight quarter.

Next week brings reports from several key mega-cap names including Amazon.

The dollar pared losses after Powell’s comments, but the dollar index was last down 0.10% at 93.64, and is off from a one-year high of 94.56 last week.

“There’s a bit of a positioning unwind taking place. We’ve obviously seen a firmer dollar since the September” Fed meeting, said Mazen Issa, senior FX strategist at TD Securities in New York. “That also dovetails with the seasonal tendency for the dollar to soften into the end of the month.”

Investors also digested news that China Evergrande Group appeared to avert default with a source saying it made a last-minute bond coupon payment.

The Dow Jones Industrial Average rose 73.94 points, or 0.21%, to 35,677.02, the S&P 500 lost 4.88 points, or 0.11%, to 4,544.9 and the Nasdaq Composite dropped 125.50 points, or 0.82%, to 15,090.20.

The pan-European STOXX 600 index rose 0.46% and MSCI’s gauge of stocks across the globe shed 0.03%.

The MSCI index posted gains for a third straight week along with the three major U.S. stock indexes.

In the U.S. bond market, yields on longer-dated U.S. Treasuries slid.

The yield on 10-year Treasury notes was down 1.6 basis points to 1.659% after rising to a five-month high of 1.7064% late Thursday.

Oil rose and ended up for the week, near multi-year highs. Brent crude futures rose 92 cents to settle at $85.53 a barrel, and registered its seventh weekly gain. U.S. crude futures gained $1.26, to settle at $83.76, and rose for a ninth straight week.

Spot gold was up 0.6% at $1,793.82 per ounce.

Among cryptocurrencies, bitcoin last fell 2.21% to $60,841.96.

For a look at all of today’s economic events, check out our economic calendar.

(Additional reporting by Simon Jessop in London, and Karen Brettell, Sinead Carew and Herbert Lash in New York and Kevin Buckland in Tokyo; Editing by Hugh Lawson Mark Potter and David Gregorio)

Marketmind: Inflation Expectations Are Soaring

A look at the day ahead from Tommy Wilkes.

In the U.S. breakeven rates rose to their highest since 2012, while in Britain a record proportion — 48% — of the British public thinks inflation will accelerate over the next 12 months, according to data, amid ongoing energy price spikes and disruption in the supply chain.

But if the potential for self-fulfilling price rises is troubling the world’s central banks as they look for ways to tame inflation without choking off economic growth, financial markets appear to be taking it all in their stride.

The S&P clocked up a new record close on Thursday, while Asian stocks — given a boost by indebted developer Evergrande making a surprise interest payment — rallied on Friday.

World stocks are now up 4.6% in October and just 1% off record highs as investors shrug off the spectre of higher inflation and tighter monetary policy and instead cheer another round of forecast-busting corporate earnings.

On Friday, European stocks looked mix at the open and Wall Street futures traded slightly below their record high.

Flash purchasing managers index survey data for October for the euro zone, Britain and the United States and due later will be watched closely by investors as a gauge of economic health.

Oil prices dipped while 10-year U.S. Treasury yields flirted with 1.7%, the highest levels since May.

In company specific news, French carmaker Renault said its production losses in 2021 because of a global semiconductor chip shortage would be far larger than previously forecast but maintained its profit outlook. Drinks maker Remy Cointreau forecasted an “exceptional” current operating profit growth in the first half of its 2021/2022 fiscal year.

Key developments that should provide more direction to markets on Friday:

-Japan CPI

-Flash PMIs everywhere

-UK GfK consumer confidence/UK retail sales

-Fed speakers:Fed chair Jerome Powell,  San Francisco President Mary Daly

-Emerging markets: Russia central bank meets

-European earnings: Pernod Ricard,

-U.S. earnings: American express, Schlumberger, Honeywell

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Tommy Wilkes; Editing by)

Stocks Slip, Yen Jumps as Evergrande Jitters Return

The more cautious tone looked set to take hold globally as well, with European futures and FTSE futures down 0.3% and S&P 500 futures dipping 0.2%.

MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.3% after briefly touching a one-month high. Japan’s Nikkei fell 1.5% as the safe-haven yen rose broadly.

Commodities also eased, with Brent crude futures down 0.2% after touching a three-year top and Chinese thermal coal futures> extending a pullback in the wake of signals that Beijing will intervene to cool prices.

“The U.S. stock market has gone up for six days in a row, bitcoin’s made a record and the U.S. bond market is calm. On the surface it looks benign,” said Andrew Ticehurst, a rates strategist at Nomura in Sydney.

“But below the surface we are uncomfortable about a number of things,” he added, chiefly the slowdown in China’s economy seen in data earlier this week, and concerns about potential fallout from Evergrande’s troubles.

China Evergrande Group has secured an extension on one defaulted bond, financial news provider REDD reported on Thursday, as the company scrambles for cash before a grace period for a dollar bond coupon payment expires on Saturday.

Late on Wednesday Evergrande said a deal to sell a $2.6 billion stake in its property services unit failed and its shares fell 12% in Hong Kong on Thursday.

Shares in rival developers drew support thanks to reassurance from a number of top Chinese officials that the trouble in the sector would not be allowed to escalate into a full-blown crisis, but global investors remain nervous. [.SS]

“We may see more Evergrande headlines weighing on China markets into the end of the week as the first 30-day grace period on unpaid offshore bonds approaches,” said Jeffrey Halley, analyst at broker OANDA.

YEN HALTS SLIDE

Wall Street had offered a positive lead after earnings helped the Dow Jones touch an all-time high and left the S&P 500 within a whisker of its record closing high.

The VIX volatility index, sometimes referred to as Wall Street’s “fear gauge”, dropped to a two-month low.

But a soft finish on the Nasdaq flowed through to tech-stock selling in Tokyo and in Hong Kong, where the Hang Seng fell 0.8%.

Longer-dated Treasury yields steadied after rising with inflation and growth expectations on Wednesday, with the benchmark 10-year yield at 1.6568%, just below the previous day’s five-month high of 1.6730%.

Investors have figured that surging energy prices and tightening job markets will pressure policymakers in the United States and elsewhere to raise interest rates before long, but stocks have scarcely reacted to shifts in rates pricing.

Fed funds futures have priced a 25 basis point U.S. rate hike in the third quarter of 2022 while eurodollar markets expect higher rates as soon as the second quarter.

“In our view, the dollar and yen face upside risks if inflation concerns spark a sharp tightening in global short-term interest rates and a sharp pullback in equity markets,” said Commonwealth Bank of Australia currency analyst Carol Kong.

The yen rose 0.3% against to 114.06 per dollar on Friday and steadied against other currencies after a long slide. The Australian dollar dipped 0.2% to $0.7501 after touching a three-month high.

China’s yuan , hovered at it strongest level in four months against the greenback, after the central bank set its official midpoint rate on Thursday below 6.4 per dollar for first time since June.

Investors are growing nervous over authorities’ apparent absence of concern about the yuan’s recent ascent, which has also taken it to its strongest level in six years against the currencies of China’s major trading partners.

Bitcoin, which hit a record on Wednesday in the wake of the U.S. listing of a futures-based exchange traded fund, eased from its peak to $64,951, while fellow cryptocurrency ether hit a five-month top of $4,243.

(Reporting by Tom Westbrook in Singapore; Editing by Sam Holmes and Kim Coghill)