European Shares Edge Lower as Investors Await Fed Meeting Minutes

 China's Services Sector Sees Slowest Expansion in Five Months

• European shares dip as investors await PMI data and Fed meeting minutes for insights into future monetary policy.
• China’s services sector experiences slowest expansion in five months due to weakening demand.
• Industrial activity in France and Spain surpasses expectations.
• Escalation in technology dispute between US and China as export controls on metals used in semiconductor manufacturing are implemented.
• HCOB Eurozone Services PMI for June 2023 revised downwards to 52.0, indicating modest and weakened growth.
• New workloads increased at a marginal pace, the slowest in five months, attributed to weaker sales performances to non-domestic customers.
• Volumes of incomplete business stabilized, while the rate of job creation softened to a three-month low.
• Input cost inflation slowed to a 25-month low, and output charge inflation reached its lowest level since October 2021.
• Business confidence declined to the lowest level recorded so far this year.

The STOXX 600 trades lower by approximately 0.5% around €460, displaying a micro balanced behavior within the developing value area during the European trading session. The revised PMI data, showing a decline, contributes to a selling sentiment, although absorption around the prior POC level offers support for the buying side.

The euro is trading 0.1% higher against the dollar, exhibiting a relatively balanced pattern on the daily interval, with evident interest from euro long buyers near the lower extreme. The short-term perspective reveals a wider swing, influenced by negative economic data that reinforces the possibility of interest rate increases to address inflationary pressures, which could benefit the euro. However, technical resistance might be encountered around the prior VWAP close level, while absorption around the lows keeps the euro in positive territory.

The dollar remains relatively unchanged, with a slight increase in the short-term perspective, rising by approximately 0.15% on the monthly basis, which might exert pressure on the euro and equities sector. Technically, the market could explore lower prices, potentially providing support for the euro.

The upcoming FED meeting minutes hold significance as they may provide insights into the US monetary policy trajectory, guiding the assessment of rate developments. The current hawkish rhetoric has a bearish impact on equities and commodities, while benefiting the dollar due to the tightening cycle. However, any indications of a dovish tone could offer support to the US stock market.

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Reposted by The Private Banker.

Euro Area Producer Prices Decline in May 2023

 First Month of Decline in Producer Prices Since December 2020

• Producer prices in the Euro Area declined by 1.5% YoY in May 2023.
• This marked the first month of decline in producer prices since December 2020.
• Energy costs experienced a significant 13.3% slump, contributing to the overall decline.
• Prices for intermediate goods dropped by 1.5% and inflation slowed for capital goods, durable goods, and non-durable consumer goods.
• Excluding energy, producer price inflation decelerated to 3.4% YoY in May.
• On a monthly basis, producer prices fell by 1.9%, marking the fifth consecutive month of decrease.
• Energy costs saw a substantial decrease of 5.0% in May, driving the overall drop in prices.
• Prices for intermediate goods declined by 1.0% and non-durable consumer goods dropped by 0.1%.
• The cost of capital goods remained unchanged, while durable consumer goods rose by 0.3%.
• Excluding the impact of energy, producer prices showed a decrease of 0.4% in May.

The decline in producer prices in the euro area may provide a boost to production and help alleviate inflationary pressures, particularly in light of the current hawkish stance of central banks. This data could have a bearish impact on the euro, while the equities market could potentially find support from the positive price developments.

Reposted from The Private Banker

US Markets With Hakwish Comments and Earnings

US stock markets with the SPX Futures contract are down by about 0.6% as investors monitor earnings and how markets react to the recent comments on monetary policy.

The Fed’s Bullard mentioned he would favor a terminal rate of about 5.50% and 5.75% while Bostic sees one more rate hike of about 25 bps before a potential halt of further hikes. Currently a rate ease is expected around November and December with higher probabilities which pressures markets as the easing projection moved from July to November.

Mixed and weakening earnings reports seemingly are another bearish factor to conclude into the current more likely bearish biased market structure while depending on the New York trading opening’s auction process, which tends to lean on buying, the market may lift higher by absorption.

The hawkish comments come along with a higher dollar which pressures commodities such as Gold which is down by about 1.6% and Crude oil which fell by about 1.7%. Meanwhile, Bitcoin which rallied recently due to the banking crisis fell by about 4% in the European trading session.

European inflation eased towards 6.9% from 8.5% by the central bank’s efforts to tighten monetary policy with current viewpoints of another rate increase of about 50 bps or 25 bps. The lower inflation read pressured the euro lower by about 0.3% against the dollar in the early trading session.

Looking at the E-mini S&P 500 we can observe some selling and long liquidations around the swing high back from February on the daily interval. Further hawkish remarks might lead the market to cycle down in a bearish rotation while any positive hints towards a dovish projection might lead core buyers to add to positions around VWAP key levels of the Quarterly and Yearly perspective. Another viewpoint to monitor in the short-term perspective is the lower volatility for the month which might surprise a soaring market, depending on economic data or events. Current calculations, which are slightly mixed, might point towards a balanced market behavior as traders could lean on the extremes to conclude a particular bracket area.

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The intraday perspective is imbalanced and out of the prior price range. The New York trading session might be able to lead the market back into the previous price range by buying around the swing lows from Monday’s session. However, current bearish calculation would point core sellers to add around the developing VWAP. 

Original post by The Private Banker.

Copper Concerns Of Lower Supply And Rate-Increases

 Copper, which fell by about 0.5% and trades around $4.08 per pound in the European trading session, is elevated by a weaker dollar and higher demand with concerns of lower supply.

Chinese credit growth is strong and supports the nation’s intentions to support the infrastructure construction which supports the price of the base metal.

The London Metal Exchange shows that inventories fell towards 56,000 tonnes which is the lowest since 2005, driving the price even higher as Goldman Sachs projects a global shortage of copper inventories around September.

The state owned company Codelco from Chile estimated that output will sink around 7% after a 10.6% decline in the prior Year. Supply concerns seemingly are the pressure factor as prices get driven higher just like with the OPEC+ production cuts for the oil price. This might add to the inflationary pressure, prompting central banks to conclude the best projections for interest rate hikes. The current more dovish view with potential cuts around July to November might be lifting for commodities as the dollar is weakening.

Looking at the technical perspective of the Copper market we can observe some selling around the Year’s upper value extreme on the daily interval. Seemingly the market closed with a selling tail and absorption in combination with long liquidations around the prior swing highs which could initiate the price to pullback as rotation to the developing VWAP or lower value extreme as secondary buying option for core long positions.

Taking a glance at the current TPO profile structure of this market, we can observe a balanced prior structure as the market cleared the unsecured low and might hit absorption to bring the price back into the previous price range which could initiate more buying. For the moment, the market is imbalanced with a slightly bearish bias for this session. Any bullish scenarios might target the prior POC level.

Current calculations, including the aspect of volatility, might show a mixed view which could lead the market to a balanced behavior, confluent with the fundamental supply concerns and the technical perspective.

SEE ALSO

Crude Oil Output Cut Suprised Lead Price To Soar

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The managed money sector is more likely mixed as investors seemingly closing positions on both sides as of the COT data from the 11th April while net buying increased for three weeks.

Hawkish remarks by Fed Gov. Waller that inflation is too high spurred the fears for additional rate-increases in combination with visible weakness in the U.S. economy by lower-than-expected retail sales, pointing to lower spending. And the higher inflation expectations, pressures commodities and equities for the session.  

Original post on The Private Banker. 

Copper Drop Due Demand Worries With Bullish Nuance

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Copper fell by about 0.4% in the European trading session by upcoming fears of lower demand and concerns of recession which pressures demand for industrial products.

• The recent PMI data showed that China’s factory activity contracted in December due to the Covid cases as well as the property sector which hurt the market context.
• A bullish factor to consider would be Chile’s output drop of about 6.7% as global copper stock have fallen to record lows.
• Additionally, mining giants forecasted supply drops of about 50 million tones which might boost the price of the metal.

The technical perspective might changed its bias to a slight bullish tendency in the new month and Year with positive volatility and a potential weakening dollar which might boosting commodities, depending on the FOMC minutes later on the session to shed details of further inflation worries and the rate hike path. Increases of the rate with higher projections might be concluded as bearish while a potential easing with a dovish tone may support the metal.

The prior month’s low of December has been taken out and might initiate buyers for core long positions in combination with absorption. The daily interval dipped below the prior month’s balanced price range and a possible close inside of the particular range could conclude an additional buying signal with a buying tail and swing failure. The mentioned core buyers might target the upper balance extreme as rotational scenario.

The hourly interval as short-term perspective already worked its way back into the day’s developing value area to target the session’s highs and the prior VWAP close level.

SEE ALSO

Copper Prices Pressured By Investors Concern Of Demand

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However, forecasts pointing to the downside, according to algorithm calculations which depend on further economic data input and the mentioned FOMC minutes.

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Reposted

Monday’s Drop Of The Sterling Pound

(The Private Banker) - The British pound rose about 1% against the dollar and traded around $1.07 in the early European trading session, bounced back after yesterday’s record drop.

Many analysts state that the sterling might reach parity with the dollar or even fell below the $1 level as the recent announced tax cuts by the British government pressured the pound which might lead to a dept sour as there are no details about a new fiscal plan for the moment while Kwasi Kwarteng plans to explain his plan on 23rd November. The mentioned tax cuts leading to higher demand which effects inflation to pressure the pound, technically and presumably.

Monday’s drop did not lead the Bank of England to deliver an emergency interest rate hike as the speculation about this matter went around, stating that market developments will be monitored and the central bank will discuss the fall of the pound in the next meeting in November.

Markets pricing in a potential 200bps hike in November as the new government plans to boost growth with scrapping the 45p top rate of income tax and replacing it with a 40p rate.

Lenders begun to withdraw montage deals as of concerns that the Bank of England will hike interest rates again to support the pound and to fight inflation.

The central bank’s chief economist Huw Pill will speak later in the morning as traders and investors await some clarification about the current situation.

Current forecasts point to the downside as the cable rate approaches the lower historical standard deviation level for potential supportive core pound buyers, while risk is imminent.

The daily interval of the particular rate against the dollar trades below the Decade, Yearly and Quarterly developing value areas with an imbalanced downside slope, giving the lower periodicities a bearish bias.

However, the current fundamental aspect of the day points to a pullback towards selling areas where traders may add to their core positions.

The hourly interval bounced back from the lows of around $1.04, testing the week’s upper value extreme for pound shorting while buyers may target the upper monthly value area which is confluent with a prior VWAP close level, above the swing highs which might lead to absorption behavior. Depending on the further auction the lower value extreme of the week’s developing value area might be supportive.

Asset managers/Institutional were kind of mixed in the prior weeks positioning with new longs of 1.619 contracts of 6B Futures contracts and shorting about 818 contracts with a net position of about minus 97.492 contracts. The leveraged fund side bought about 5334 contracts while covering about 8154 short contracts as of September 20th.

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Crude Oil Below $90 By Economic Worries While Bouncing Back

Crude oil WTI is down by about 0.5% while bouncing back towards $91 from the lower value extreme of the month’s VWAP. The market was trading briefly below $90 in the European trading session.

The oil market is pressured by concerns of a global economic slowdown which may hurt energy demand and lead to tightening supply.

Central banks around the world are tightening their monetary policy and lifting interest rates higher to fight the inflationary rising prices which may lead to lower demand for a pressured oil price.

Additionally, Covid outbreaks in major Chinese cities of Shenzhen, Guangzhou, and Dalian placed millions under lockdowns and might result in slow economic activity in the second largest economy.

Clashes in Iraq did not affect the OPEC output for the moment while the New York trading session found some short covering. OPEC will meet in September for production policy while the Energy minister of Saudi Arabia mentioned that a revival of the Iran 2015 deal would lead to a production cut which eventually would be a bullish factor for the crude oil price.

The daily interval found some supportive core buyers around the Year’s lower value extreme, and raised the price back into the Quarter’s value area. The mentioned levels were confluent with the month’s lower standard deviation level of the VWAP which brought buyers and short covering into the market.

The short-term to median-term perspective may targeting rotations towards the upper value extreme of the Quarter’s view which stands around $100. The secondary target may lay around $112, depending on the auction around the mentioned Quarter’s DVAH and the Year’s VWAP.

The month fell by about 7.7% the third month in the row while the market found some core buyers around the Decade”s upper value extreme. Support is depending on the potential output cut which may lead to median-term long buyers.

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