Central banks continue to aggressively raise interest rates. Today’s focus is on US inflation data :: InvestMacro

by just forex

Yesterday, the yield curve for two-year and ten-year bonds came close to closing since 2007, with the curve remaining inverted. The widening spread between 2- to 10-year bonds is a clear warning of recession. “But the second-quarter results for banks should be strong, as it is too early for banks to make meaningful provisions for potential credit losses in the event of a possible recession in the United States,” Deutsche Bank said in a report.

The Dow Jones (US30) lost 0.62%, and the S&P 500 (US500) lost 0.92% at the close of trading on Tuesday. The Nasdaq Technology Index (US100) declined yesterday by 0.95%. At the end of the day, all three indicators were down.

Citigroup Inc expects the benchmark S&P 500 (US500) to end the year at 4,200 points, which is lower than the forecast made by the bank in late June (4700) and much higher than it is now. Oppenheimer & Co.. He remains optimistic about the benchmark index, although last week it lowered its target price from its previous forecast of 5,330 points to 4,800. Credit Suisse Group analysts revised their forecast for the S&P 500 (US500) to 4,300 points at the end of the year. Morgan Stanley strategists expect the S&P 500 (US500) to reach its 3400-3500 target in the absence of a confirmed recession. However, if the economy ends up in a recession, the index could drop to 3,000 points later this year.

Stock markets in Europe were higher yesterday. Germany’s DAX (DE30) rose 0.57% Tuesday, France’s CAC 40 (FR 40) jumped 0.80%, Spain’s IBEX 35 (ES35) shed 0.62%, and Britain’s FTSE 100 (UK100) closed 0.18% higher yesterday.

The euro’s slide toward parity against the dollar was caused by a combination of problems: a different approach by the European Central Bank and the Federal Reserve System, the threat of a serious recession in Europe, and geopolitical uncertainty. Investors will have to reassess the EU’s economic prospects if Russia decides to restrict gas supplies to the continent. A possible “pessimistic” reassessment of expectations for European Central Bank rates could increase the divergence in yields of Treasuries and other sovereign bonds. This could result in EUR/USD dropping below 1.

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Oil fell to its lowest level in three months as fears of a global recession mount. The Organization of the Petroleum Exporting Countries (OPEC) has indicated new concerns about demand, and has predicted that oil demand will grow more slowly in 2023. Rising infections in China and approaching US inflation data are raising demand concerns. WTI lost more than 8% and closed below $96 a barrel for the first time since early April. Money managers are getting more bearish in major oil indices, cutting their net long positions last week to their lowest level since 2020. The US cut its forecast for oil production growth through 2023, citing inflation and a labor shortage. Meanwhile, the White House on Monday urged OPEC to produce more oil, saying it believed the group of oil-exporting countries could do so.

Gold prices continue to decline. Gold and silver prices are inversely correlated with the US dollar index and US government bond yields. Amid the tightening of monetary policy, the US dollar index is rising along with government bond yields, which has led to selling pressure on gold and silver prices. Many traders believe that gold is the best hedge against high inflation, but this does not work in the current market conditions.

Asian markets were mostly lower yesterday. Japan’s Nikkei 225 (JP225) is down 1.77%, Hong Kong’s Hang Seng (HK50) is down 1.32% and Australia’s S&P/ASX 200 (AU200) is up 0.06% on the day.

New Zealand’s central bank raised interest rates by 50 basis points to 2.5%. It is the sixth consecutive increase. At the same time, the Reserve Bank of New Zealand made it clear that it remains happy with the planned tightening path. The Reserve Bank of New Zealand is currently planning to raise the rate to 3.5% by the end of this year and reach 4% by mid-2023.

South Korea’s central bank raised its benchmark interest rate by half a percent to 2.25 percent on Wednesday, seeking to bring down inflation from a 24-year high and offset fears of a sharp economic slowdown amid a decline in business activity.

S&P 500 (F) (US500) 3818.80 −35.63 (−0.92%)

Dow Jones (US 30) 30981.33 192.51 (−0.62%)

DAX (DE40) 12905.48 +73.04 (+0.57%)

FTSE 100 (UK100) 7,209.86 +13.27 (+0.18%)

US dollar index 108.12 +0.10 (+0.09%)

Important events for today:

  • – New Zealand Bank of New Zealand interest rate decision at 05:00 (GMT + 3);
  • – RBNZ New Zealand rate statement at 05:00 (GMT +3);
  • – UK GDP (m / m) at 09:00 (GMT + 3);
  • – UK industrial production (m / m) at 09:00 (GMT + 3);
  • – UK industrial production (m / m) at 09:00 (GMT + 3);
  • – German CPI for the Eurozone (monthly) at 09:00 (GMT +3);
  • – French CPI for the Eurozone (monthly) at 09:45 (GMT +3);
  • – Spanish Eurozone CPI (monthly) at 10:00 (GMT +3);
  • – industrial production in the euro area (cubic meters) at 12:00 (GMT + 3);
  • – US Consumer Price Index (m / m) at 15:30 (GMT + 3);
  • – Bank of Canada interest rate decision at 17:00 (GMT +3);
  • – Bank of Canada (BoC) monetary policy report at 17:00 (GMT + 3);
  • – US crude oil reserves (w / w) at 17:30 (GMT + 3);
  • – Bank of Canada press conference at 18:00 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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