Yields reach critical levels in US, Germany, and Australia
European stocks recover from flash crash
Gold going bearish
U.S. futures for the Dow Jones, S&P 500, NASDAQ 100 and Russell 2000 are fluctuating on Tuesday at time of writing, after starting higher this morning while European shares are rising. All of this is occurring amid a global bond selloff that began in the US on Monday, when Treasury yields pushed past 3%, ahead of what is expected to be a sharp interest rate hike by the Fed on Wednesday.
The dollar wobbled as gold was sold off again today.
Global Financial Affairs
After the tech-heavy NASDAQ 100 was the leader of Monday’s Wall St. session with the mega-cap Dow the laggard, as we go to press, contracts on the NASDAQ and the small-cap Russell have been wavering between leadership and the second position—an indication, perhaps that investors are torn between growth and value shares given the uncertainty regarding the level of hawkishness of upcoming interest rate positioning.
The STOXX Europe 600 Index extended a rebound from yesterday’s early selloff that uncharacteristically diverged from US futures and stocks. It seems, however, that ‘selloff’ was actually what’s being labeled a ‘Nordic Flash Crash,’ a trading error on the OMX Stockholm 30 Index that was quickly fixed. Thin trading volume because of a holiday in the UK and Ireland exacerbated the issue.
Nevertheless, dip-buyers who took advantage of the bargain prices were only able to bid up prices about halfway, demonstrating resistance.
The pan-European benchmark topped out, and a possible Evening Star was formed, with a Shooting Star at its center, confirming that sellers were sticking to their guns. Today’s struggle to maintain the ascent reinforces the bearish view.
Nevertheless, the Energy and Financials sectors led today’s advance. Shares of oil giant BP (LON:BP) opened higher in London trading, for the third consecutive day, after the energy major increased its share buybacks by $2.5 billion, the result of its surging cash flow. However, the company’s stock still faces an uphill battle.
Today’s volatile trading may be forming a Hanging Man (the candle has been changing at the time of writing), a candlestick whose rise pulls in bulls that could be left hanging if the price closes below its opening price in the following session. Alternatively, if intraday trading develops a long upper shadow, the candle could turn into a High Wave Candle, also an indicator for a reversal. The potentially bearish candle carries more weight as it confirms the Shooting Star of Apr. 19, a candle that develops when bulls try to advance but fail.
French lender BNP Paribas (EPA:BNPP) also opened higher after revealing strong trading growth. However, its technical chart favors a continued downtrend.
The price has developed a symmetrical triangle, prone to a downside breakout within the downtrend.
Earlier, during the Asia session, most regional indices finished in the red, though China and Japan were closed for holidays. The expected, 50-basis point Fed rate hike, the most significant rate increase from the US central bank since 2000, weighed on sentiment.
Rising inflation, however, is not just an American problem. South Korea’s KOSPI slipped 0.25% after data revealed inflation in the Asian country reached a 13-year high in April.
Australia’s ASX 200 lost 0.4% after the Reserve Bank of Australia increased interest rates by 25 bps, beating expectations of just a 15 bps hike. The central bank raised its rate for the first time in 11 years in order to fight the highest inflation for the land down under in 20 years. The Aussie dollar jumped initially but has been fluctuating since, as the increase pales in comparison to the expected 50-bsp hike on Wednesday by the US Federal Reserve.
Yields on 10-year Treasuries retreated slightly from the 3.00% threshold, reached for the first time since November 2018.
The US dollar edged lower though it wobbled in contracting trade, for a third day, ahead of this week’s much-anticipated FOMC meeting.
Gold traders were more decisive, selling off the yellow metal for the second day.
We are now officially making a bearish call on Gold after the price decisively broke the downside of the triangle and fell below the November peak. We expect the price could revisit the $1,700s if it violates the rising trend line beneath.
Bitcoin was little changed, waiting for a resolution between its bearish flag and the bullish channel bottom. We’re betting on the flag, based on our broader call.
Oil edged lower as investors considered demand amid China’s lockdown and Europe’s mission to wean itself off Russian energy. The same indecision is displayed on the chart.
WTI moved sideways, out of a trading range, instead of making a decisive move.
US factory orders, durable goods are printed on Tuesday.
The EIA’s weekly crude oil inventories report is released on Wednesday.
The Bank of England’s rate decision and Governor Bailey speaks on Thursday.
OPEC+ convenes virtually for their monthly meeting, on Thursday.
US Nonfarm Payrolls report is released on Friday.
The MSCI Asia Pacific Index Index fell 0.2%
The euro rose 0.1% to $1.0521
The British pound rose 0.4% to $1.2540
Germany’s 10-year yield rose four basis points to 1.01%
Britain’s 10-year yield increased 10 basis points to 2.00%
Brent crude fell 0.5% to $107.03 a barrel
Spot gold fell 0.3% to $1,858.01 an ounce