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US stocks rebound on moves by central banks

 

Tuesday, June 21, 2022

The news shaping the markets today

Ukraine said it had lost control of the Severodonetsk village to Russian forces. The news sent the WTI crude oil futures higher this morning.


Luxembourg’s unemployment rate fell to 4.6% in May, from 4.7% in the earlier month. This being the lowest reading since December 2008 sent the EUR/USD pair higher in forex trading this morning.


New Zealand’s consumer confidence indicator eased to 78.7 in the second quarter, from 92.1 in the prior period. Despite this being the weakest reading in history, the NZD/USD forex pair remained elevated.


Macau’s visitor arrivals declined by 30.6% year-over-year to 600,748 in May, following a 23.7% decline in the previous month, sending the MOP/USD pair lower in forex trading this morning.


Taiwan’s export orders surged by 6.0% from a year ago to $55.4 billion in May, following a 5.5% decline in the previous month. However, the TWD/USD forex pair traded slightly lower after the news.

 

What’s happening: US stocks closed mostly higher on Friday, after recording sharp losses during week.

What happened: US markets remained closed on Monday for the Juneteenth holiday.

While most major US indices recovered on Friday, with Wall Street investors looking to find a footing after the week’s sharp sell-off, one of the indices recorded its worst week since 2020.

Why it matters: US stocks recorded sharp losses last week, with investors awaiting the Federal Reserve’s policy decision.

The Fed raised its benchmark interest rate by 75 bps at its latest meeting, hiking rates by the most since 1994. The Swiss National Bank are raised interest rates last week and other major central banks are expected to followed suit, given the steep acceleration in inflation rates in the world’s most advanced economies.

Fed Governor Christopher Waller said he would back a further rate hike of 75 basis points during the meeting in July.

Wall Street remained highly volatile on Friday, with markets remaining concerned about the prospects of an economic slowdown. However, the beaten-up technology stocks recovered sharply, taking the Nasdaq 100 higher by 1.24% to settle at 11,265.99.

Travel-related shares, including Carnival Corporation, airline stocks and Airbnb, also recorded gains, rising around 10%. The S&P 500 added 0.22% to close at 3,674.84. Despite the gains, the index recorded its worst week since 2020.

The 30-stock Dow Jones index fell below the 30,000 mark again on Friday. The blue-chip heavy index shed 38.29 points, or 0.13%, to end the day at 29,888.78. Trading remained thin on Monday due to the Juneteenth holiday in the US holiday.

What to watch: Investors will monitor speeches by several US Fed officials this week for more insight into the central bank’s commitment to monetary tightening. Data on inflation will play a key role in determining market sentiment.

Investors also await the release of economic data on Chicago Fed National Activity Index and existing home sales due today.

The markets today

Bitcoin will be in focus today after gaining some upward momentum on Monday

Context: Bitcoin moved higher on Monday, surging past the $20,000 resistance level, after maintaining a downward trajectory last week.

Details: Bitcoin, the largest cryptocurrency by market capitalisation, had declined below $20,000 on Saturday morning, reaching its lowest price since November 2020.

Bitcoin recovered on Monday, reflecting renewed investor appetite for risk and traders looking for options that are relatively insulated from the impact of inflation and moves by central banks around the world.

Ethereum, the second-largest crypto, staged a sharper recovery than bitcoin, after dipping as low as $880 on Saturday. While Bitcoin moved past $20,000, Ethereum crossed the $1,100 resistance level.

The global cryptocurrency market capitalisation surged about 7% to $885 billion on Monday.

What to watch: Traders will keep an eye on inflation data and tightening moves by central banks around the world.

Other Markets: European trading indices closed higher on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 up by 1.50%, 1.06%, 0.64% and 0.96%, respectively.

Support & resistances for today

Technical Levels News Sentiment
USD/JPY – 135.00 and 135.13 Positive
AUD/USD – 0.6966 and 0.6979 Positive
Nasdaq 100 – 11243.62 and 11297.47 Positive
Dow Jones – 29814.83 and 30002.13 Positive
Gold – 1841.40 and 1843.65 Positive

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0537, 0.25%) Dow ($30,189, 1.07%) Brent ($115.94, 1.6%)
GBP/USD (1.2272, 0.17%) S&P500 ($3,721, 1.22%) WTI ($110.69, 2.5%)
USD/JPY (135.14, 0.03%) Nasdaq ($11,441, 1.27%) Gold ($1,842, 0.1%)

What else to watch today

South Africa’s leading business cycle indicator, Eurozone’s current account, Italy’s current account, UK’s Confederation of British Industry’s order book balance, Central Bank of Brazil’s Copom meeting minutes, Mexico’s GDP aggregate demand and consumer spending, Canada’s retail sales and new housing price index, as well as Indonesia’s motorbike sales.


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