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Tuesday, July 12, 2022, 8.45am GMT
The White House said Iran could be preparing to deliver hundreds of weapons-capable drones to Russia for use in its ongoing war with Ukraine. The news sent the safe-haven US dollar index higher this morning.
Australia’s Westpac-Melbourne Institute Index of consumer sentiment fell 3.0% in July. Despite the index weakening for eight straight months, the AUD/USD forex pair remained elevated after the news.
Japan’s producer prices accelerated 9.2% year-over-year in June, above market expectations of an 8.8% rise. However, the JPY/USD pair rose in forex trading this morning.
UK’s retail sales contracted by 1.3% year-over-year in June, falling for the fourth month in a row amid surging inflation. The news exerted pressure on the GBP/USD forex pair.
New Zealand’s number of visitor arrivals climbed 26.3% year-over-year to 72,755 in May, reaching the highest number since the outbreak of the pandemic. The surge in tourist arrivals lent support to the NZD/USD forex pair.
What’s happening: Natural gas futures recorded sharp gains on Monday on the closure of the Nord Stream 1 pipeline.
What happened: Fears of a prolonged closure of one of Europe’s major pipelines sent natural gas prices to their strongest level in July.
However, one of the major energy products closed lower on Monday amid concerns around demand.
Why it matters: Natural gas is one of the key energy products for most economies, and any shortage could negatively impact global economic growth.
Although the European Union is looking to replace Russia’s output with liquefied natural gas, the move could take time.
Natural gas prices rose sharply on Monday, following the closure of the Nord Stream 1 pipeline, which transports natural gas from Russia to Germany. Moscow had already reduced gas supplies via Nord Stream 1 by about 60% before the maintenance issues cropped up at the pipeline. Some analysts expressed concern around gas deliveries through the pipeline being halted in retaliation of sanctions on Russia.
August natural gas climbed 6.5%, or 39 cents, to close at $6.426 per million British thermal units, notching the highest settlement since June 29. US crude oil futures settled lower on Monday amid growing concerns around energy demand due to renewed covid-19 restrictions in China with the emergence of the BA.5 omicron subvariant.
WTI crude for August delivery declined 0.7%, or 70 cents, to close at $104.09 per barrel on the NYMEX on Monday. September Brent crude rebounded in late trading to settle at its strongest level in a week, gaining around 0.1% to reach $107.10 per barrel.
August gasoline gained 0.4% to $3.4622 a gallon, while August heating oil added 2.6% to $3.7681 a gallon.
What to watch: Traders will keep an eye on US President Joe Biden’s visit to Saudi Arabia this week in a bid to reset relations with the major oil producer.
The release of data on natural gas stockpiles from the EIA (Energy Information Administration), due on Thursday, will also remain in focus. Working gas held in storage facilities in the US rose by 60 billion cubic feet in the week ending July 1. Markets will also monitor the API’s (American Petroleum Institute) and EIA’s reports on crude oil inventories, scheduled for release on Tuesday and Wednesday, respectively.
Context: Although stock markets in the Asia-Pacific region closed lower on Monday due to renewed covid-19 restrictions in China, one of the major markets recorded sharp gains.
Details: Market sentiment was hurt by concerns over rising covid-19 cases in China after Shanghai reportedly discovered a new subvariant of omicron.
Markets had been supported by the US releasing a good jobs report on Friday, which showed nonfarm payrolls for June reaching 372,000, well above market expectations of 250,000.
However, some recent economic reports exerted pressure on the stock markets on Monday. China’s producer inflation increased 6.1% year-over-year in June. Although the figure marked a deceleration from May’s reading of 6.4%, it was higher than market expectations of 6%. Consumer inflation rose 2.5% from a year ago, coming in higher than the consensus estimate of 2.4%. The Shanghai Composite fell 1.27% to settle at 3,313.58 on Monday.
Hong Kong’s Hang Seng index declined by about 3% to close at 21,124.2, amid news of China imposing fines on several big companies, including Alibaba and Tencent for disclosure violations.
Japan’s Nikkei 225 climbed as much as 2% during Monday’s session and closed higher by 1.11% at 26,812.3 after Shinzo Abe’s party retained a majority in the Upper House elections days after the former Prime Minister was assassinated in Nara city in western Japan while delivering a campaign speech.
Australia’s S&P/ASX 200 fell 1.14% to 6,602.2, while South Korea’s Kospi settled lower by 0.44% to 2,340.27 on Monday. Markets in Singapore and Malaysia were closed for Eid.
What to watch: Investors will keep an eye on economic data on GDP, the balance of trade, industrial production and retail sales from China. Markets will also focus on inflation data from the US, scheduled for release on Wednesday. Investors await the upcoming earnings season.
Other Markets: US indices closed lower on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.52%, 1.15% and 2.19%, respectively.
|Technical Levels||News Sentiment|
|USD/JPY – 137.00 and 137.20||Positive|
|USD/CAD – 1.3014 and 1.3025||Negative|
|Gold – 1731.65 and 1734.70||Negative|
|Silver – 19.069 and 19.126||Positive|
|Nasdaq 100 – 11833.90 and 11881.29||Positive|
|Futures at 0400 (GMT)|
|EUR/USD (1.0025, -0.18%)||Dow ($31,013, -0.41%)||Brent ($106.03, -1%)|
|GBP/USD (1.1884, -0.07%)||S&P500 ($3,839, -0.46%)||WTI ($102.99, -1.1%)|
|USD/JPY (137.13, -0.21%)||Nasdaq ($11,821, -0.53%)||Gold ($1,734, 0.1%)|
Eurozone’s ZEW indicator of economic sentiment, Germany’s ZEW indicator of economic sentiment and ZEW current conditions subindex, US NFIB small business optimism index, Redbook index, IBD/TIPP economic optimism index and consumer inflation expectations, Mexico’s industrial production, South Africa’s industrial production, India’s industrial production, inflation rate and manufacturing production, as well as Brazil’s industry confidence indicator.
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