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Wall Street begins H2 of year on a positive note

 

Tuesday, July 05, 2022

The news shaping the markets today

Russian President Vladimir Putin ordered the military to increase their offensive into Ukraine’s Donbas region after seizing the city of Lysychansk. The continuous crisis in Ukraine sent WTI crude oil prices higher this morning.


China’s Caixin general services PMI climbed to 54.5 in June, from 41.4 in the previous month, signalling the first expansion in the services sector in four months and lending support to the CNY/USD forex pair.


Australia’s retail sales grew by 0.9% to another record high of A$34.23 billion in May, following 0.9% growth in the previous month. The country’s retail trade surged for the fifth straight month, sending the AUD/USD pair higher in forex trading this morning.


Japan’s au Jibun Bank composite PMI improved to 53.0 in June, from 52.3 in the previous month. However, the figure was lower than the flash estimate of 53.2, which exerted pressure on the JPY/USD forex pair.


Singapore’s S&P Global PMI fell to 57.5 in June, from May’s record high of 59.4. However, the latest reading still signalled the 19th straight month of growth in the sector, sending the SGD/USD pair higher in forex trading this morning.

 

What’s happening: US stocks moved higher on Friday, with the Dow Jones index adding more than 300 points.

What happened: Wall Street had recorded sharp losses during the first half of the year, representing its worst six-month performance in decades.

After the long correction, US equities bounced back on Friday with investors looking for undervalued names to buy.

Why it matters: US stocks rebounded on Friday, a day after the S&P 500 recorded more than 16% losses for the quarter, its biggest single-quarter decline since March 2020. The broader market index lost 20.6% during the first half of the year, its biggest first half decline since 1970.

Several Wall Street analysts expressed their optimistic around a rebound in US equities in the second half of the year. They said that all the concerns, including supply chain disruptions, geopolitical tensions related to the Russia-Ukraine crisis, inflation, and monetary policy tightening by the Fed and other major central banks, were already priced into the share prices. They also pointed out that empirical data suggests that whenever the stock market has declined by more than 15% in the first part, it has rebounded sharply in the remainder of the year.

On the economic data front, the ISM’s index of national factory activity declined to 53 for June, the weakest reading since June 2020. The ISM’s new orders index also fell to 49.2, from 55.1 in the prior month, representing a contraction for the first time since May 2020.

The Dow Jones index gained 321.83 points, or 1.1%, to settle at 31,097.26 on Friday, while the S&P 500 added 1.1% to reach 3,825.33. The Nasdaq 100 climbed 0.71% to close at 11,585.68. US markets remained closed on Monday for the Independence Day holiday.

Homebuilder stocks rose sharply, with PulteGroup’s and Lennar’s shares adding around 6% each. McDonald’s stock was among the top performers on the Dow.

What to watch: Investors will keep an eye on the upcoming earnings season, June’s employment data, and the Fed’s monetary policy meeting scheduled for July.

The release of factory orders will remain in focus today. Factory orders in the US had grown by 0.2% to $533.2 billion in April and are projected to rise by 0.5% in May.

The markets today

The British pound will be in focus today ahead of a basket of economic reports from the country

Context: The GBP/USD forex pair rose on Monday, amid some improvement in overall investor risk appetite.

Details: Last week, the British pound had recorded its steepest six-month decline since 2016, falling more than 10% versus the safe-haven greenback.

Traders are now looking for signs of the Bank of England raising interest rates faster than projected, amid surging inflation and concerns around economic growth. The BoE has boosted interest rates five times since December 2021 and is scheduled to announce its next policy decision on August 4. Some market experts projected policymakers to vote for hiking rates by 50 bps at the upcoming meeting.

An improvement in overall risk sentiment in the market also supported the sterling, which record gains versus the safe-haven currencies.

The GBP/USD forex pair rose by 0.08% to 1.2113 this morning.

What to watch: Traders await the release of economic data on new car registrations, services PMI and composite PMI from the UK today. The S&P Global/CIPS services PMI is expected to come unchanged from the previous month’s 53.4, while the composite PMI is projected to remain at 53.1 in June, unchanged from the 15-month low recorded in May.

The financial stability report from the UK will also remain in focus today. Markets will carefully monitor speeches from Bank of England’s Chief Economist Huw Pill on Wednesday and Catherine L Mann, member of the Monetary Policy Committee, on Thursday, to look for signs of future rate hikes.

Other Markets: European trading indices closed mostly higher on Monday, with the FTSE 100, CAC 40 and STOXX Europe 600 up by 0.89%, 0.40% and 0.54%, respectively, and the DAX 40 down by 0.31%.

Support & resistances for today

Technical Levels News Sentiment
EUR/USD – 1.0432 and 1.0435 Positive
GBP/USD – 1.2114 and 1.2118 Positive
Gold – 1809.21 and 1811.36 Positive
WTI Crude Oil – 110.02 and 110.71 Positive
Nikkei 225 – 26216.66 and 26374.16 Negative

 

Market snapshot

Futures at 0400 (GMT)
EUR/USD (1.0432, 0.07%) Dow ($31,162, 0.33%) Brent ($113.69, 0.2%)
GBP/USD (1.2113, 0.08%) S&P500 ($3,842, 0.38%) WTI ($110.52, 1.9%)
USD/JPY (136.18, 0.35%) Nasdaq ($11,663, 0.45%) Gold ($1,812, 0.6%)

What else to watch today

Russia’s services PMI and composite PMI, France’s industrial production, services PMI and composite PMI, South Africa’s S&P Global PMI, Spain’s services PMI, composite PMI and consumer confidence indicator, Italy’s services PMI and composite PMI, Germany’s services PMI, composite PMI and car registrations, Eurozone’s services PMI and composite PMI, Mexico’s consumer confidence, Brazil’s industrial output, services PMI and composite PMI, Canada’s total value of building permits, as well as US Logistics Manager’s Index.


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