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US stocks notch gains on strong economic data

 

Monday, August 15, 2022

The news shaping the markets today

Ukraine President Volodymyr Zelenskyy said any Russian soldier threatening the Zaporizhzhia nuclear power plant would become a “special target.” Continued geopolitical tensions sent the safe-haven US dollar index higher this morning.


China’s retail trade grew by 2.7% year-over-year in July, following a 3.1% growth in the previous month. The latest reading missed market expectations of 5% growth, which exerted pressure on the CNY/USD forex pair.


Japan’s economy expanded by 2.2% on an annualised basis in the second quarter. This being the third straight quarter of growth sent the JPY/USD pair higher in forex trading this morning.


New Zealand’s Performance of Services Index fell to 51.2 in July, from a reading of 54.7 in June. This represented the lowest growth in the country’s services activity in five months and exerted pressure on the NZD/USD forex pair.


The People’s Bank of China surprisingly lowered a key policy interest rate for the first time since January. However, the SSE Composite Index remained almost flat after the news.

 

What’s happening: US stocks closed higher on Friday, to mark another week of gains.

What happened: Wall Street notched its fourth straight week of gains last week, despite finishing on a mixed note on Thursday.

Investor sentiment was supported by lower-than-expected consumer prices and producer prices data for July.

Why it matters: US producer prices fell 0.5% in July, recording the first decline in more than two years. The country’s consumer prices came in unchanged versus the prior month, after jumping to a 17-year high of 1.3%. One-year inflation expectations also eased to 5%, from 5.2% in the previous month.

Sentiment on Wall Street was also supported by upbeat data on consumer sentiment released Friday. The University of Michigan’s preliminary consumer sentiment index rose to 55.1 in August, from 51.5 in July.

The latest data raised hopes of the Federal Reserve becoming less aggressive in its rate hikes at its upcoming meetings.

The S&P 500 added 3.3% and the Nasdaq 100 gained 3.1% last week, representing the longest weekly winning streak for both indices since the week ended November 5, 2021.

The Dow Jones index rose 424 points, or 1.27%, to close at 33,761.05 on Friday, while the S&P 500 gained 1.73% to settle at 4,280.15 and the Nasdaq 100 surged 2.06% to 13,565.87.

What to watch: Investors await the release of economic data on the New York Empire State Manufacturing Index and housing market index, due for release today. The New York Empire State Manufacturing Index, which climbed to 11.1 in July, is expected to decline to 8 in August. The NAHB housing market index fell to the weakest reading since May 2020 in July. Analysts expect the index to recover slightly to 58 in August, from July’s reading of 55.

The markets today

The Canadian dollar will be in focus today ahead of a basket of economic reports from the country

Context: The CAD/USD forex pair edged lower on Friday, amid a decline in crude oil prices.

Details: Although the Canadian dollar settled lower on Friday, it recorded the steepest weekly gain this year with signs that US inflation may be peaking, and its easing could allow the Federal Reserve to follow a less aggressive monetary tightening policy.

The price of crude oil, one of Canada’s major exports, declined on Friday. WTI crude oil prices lost 2.4%, settling at $92.09 per barrel. Despite this, crude oil still ended the week with gains.

The CAD/USD forex pair fell 0.11% to 1.2778, but added around 1.2% last week, marking its biggest weekly gain since December 2021. The loonie had climbed to its highest level in two months on Thursday.

The S&P/TSX Composite Index surged past the 20,000 resistance level and settled higher by 0.94% at 20,179.81 on Friday.

What to watch: Traders await the release of economic reports on new motor vehicle sales, manufacturing sales and wholesale sales from Canada today. Analysts expect car registrations in Canada to rise to 160,000 units in June, from 150,371 units in May. Manufacturing sales in Canada are projected to decline 1% in June, while wholesale sales are expected to grow by 0.5%.

Canada’s inflation data, due for release on Tuesday, will also remain in focus.

Other Markets: European trading indices closed higher on Friday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 0.47%, 0.74%, 0.14% and 0.16%, respectively.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0240 and 1.0248 Negative
GBP/USD – 1.2110 and 1.2117 Positive
Gold – 1810.90 and 1812.50 Positive
Nasdaq 100 – 13543.88 and 13573.79 Negative
Nikkei 225 – 28829.00 and 28866.50 Negative

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0251, -0.08%) Dow ($33,649, -0.20%) Brent ($97.18, -1%)
GBP/USD (1.2117, -0.17%) S&P500 ($4,271, -0.23%) WTI ($91.19, -1%)
USD/JPY (133.28, -0.13%) Nasdaq ($13,545, 0.24%) Gold ($1,811, -0.2%)

What else to watch today

Germany’s wholesale prices, Saudi Arabia’s inflation rate and wholesale price inflation, Turkey’s government budget balance and total motor vehicles production, Brazil’s IBC-Br index of economic activity and Central Bank of Brazil’s focus market readout, India’s total passenger vehicles sales, China’s foreign direct investment, as well as US net long-term TIC flows, net treasury international capital flows and net purchases of treasury bonds and notes.


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