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European stocks close lower on US inflation data

The news shaping the markets today

Russian President Vladimir Putin said on Tuesday that peace talks with Ukraine had hit a dead end, vowing that his troops will be victorious in achieving the “noble” aims in Ukraine. Gold futures climbed as investor increased safe-haven options in their portfolios.


The Eurozone’s ZEW Indicator of Economic Sentiment fell gain to -43 in April, from -38.7 in February. This being the lowest reading since March of 2020 exerted pressure on the EUR/USD forex pair.


Japan’s private-sector machinery orders fell on a seasonally adjusted basis by 9.8% in February, higher than the previous month’s 2% decline. The contraction was also much more than the 1.5% consensus estimate, which sent to JPY/USD pair lower in forex trading this morning.


Germany’s ZEW Indicator of Economic Sentiment declined by 1.7 points to -41 in April, hitting the lowest level since March 2020. However, the figure still came in better than market expectations of -48, lending support to the EUR/GBP forex pair.


The US budget deficit narrowed to $193 billion in March, from $660 billion in the month in the previous year. The figure came broadly in-line with market expectations of a $191 billion deficit. The US dollar index rose after the news.

 

What’s happening: The major European indices closed lower on Tuesday, as traders monitored US inflation data and the strengthening US dollar.

What happened: Investors reduced European equities in their portfolios, led by banking stocks.

Markets also remained on the sidelines with the latest US inflation data expected to impact the Federal Reserve’s upcoming monetary policy.

Why it matters: The US reported an acceleration in consumer prices to 8.5% in March, hitting the highest fastest inflation rate since 1981. The annual inflation rate not only accelerated from 7.9% in February, but also came in higher than market expectations of 8.4%.

Energy prices rose by a whopping 32%, due mainly to Russia’s invasion of Ukraine, and accounted for most of the monthly acceleration in US inflation.

News of an undisclosed investor selling large stakes in Deutsche Bank and Commerzbank also impacted the European indices. Shares of Deutsche Bank tanked 9.4%, while Commerzbank’s stock plummeted 8.5% following reports of the investor selling 116 million shares of the former and 72.5 million of the latter, representing over 5% of Germany’s two biggest banks.

Markets also remained concerned on news of rising covid-19 cases in China. The Stoxx Europe 600 shed 0.35% to settle at 456.65. Germany’s DAX lost 0.48% to close trading at 14,124.95, while France’s CAC 40 declined by 0.28% to reach 6,537.41. UK’s FTSE 100 declined by 0.55% to close at 7,576.66.

What to Watch: Investors will closely monitor earnings reports from US banking giants. JPMorgan is scheduled to report results later today, while Goldman Sachs, Wells Fargo, Citi and Morgan Stanley are due for their earnings releases tomorrow.

Markets will also keep an eye on the Russia-Ukraine situation and its important on inflation.

The markets today

Crude prices will be in focus today ahead of the EIA’s report on US stockpiles

 

Context: Crude prices spiked on Tuesday, as investors responded to the relentless Ukraine crisis.

Details: Oil futures climbed more than 7% on Tuesday, after maintaining a downward trajectory through most of the past two weeks due to rising covid-19 cases in China and Europe.

Investors responded to reports alleging Russia’s use of chemical weapons in the Ukrainian city of Mariupol. The reports are, however, yet to be verified by European and US officials.

The OPEC’s continued stance to expand output gradually, even as sanctions have been imposed on Russian oil exports, are lending support to crude prices.

The API’s (American Petroleum Institute) report showed that crude oil stockpiles in the US had risen by 7.757 million barrels in the week ending April 8, following an increase of 1.08 million barrels in the previous week. The figure came in significantly higher than market expectations of an increase of 1.367 million barrels and was the largest increase in crude oil inventories since the first week of May 2021.

WTI crude for May delivery climbed by 7.10% to reach $100.76 on Tuesday, while Brent crude for June delivery climbed 6.86% to $104.63.

What to watch: Traders await the release of data on US crude oil stockpiles by the Energy Information Administration. US crude inventories, which had risen by 2.421 million barrels to 412.4 million barrels in the week ending April 1, are expected to increase by another 1.367 million barrels in the week ending April 8.

Investors will also keep an eye on the Russia-Ukraine tensions and rising coronavirus cases, especially in China.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones index, S&P500 and Nasdaq 100 down by 0.26%, 0.34% and 0.30%, respectively.

Support & resistances for today

Technical Levels News Sentiment
AUD/USD – 6907 and 7270 Negative
Gold – 1829 and 1903 Negative
S&P 500 – 29856 and 35033 Negative
WTI Crude – 90.06 and 100.54 Positive
CAC 40 – 6432 and 6757 Positive

 

Market snapshot

What else to watch today

Spain’s inflation rate, Frances IEA oil market report, Italy’s industrial production and BTP auction, Germany’s 10-year bund auction, South Africa’s retail sales, US’s 30-year mortgage rate, mortgage refinance, purchase index, and core producer price index, Brazil’s retail sales, as well as Canada’s interest rate decision and monetary policy report.

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